Equities Market Record Inconsistency in the Wake of Declining Performance in April

April wasn’t the best month for traders of equities at the Nairobi Securities Exchange (NSE); the market performance registered a falling trend where NASI, NSE 20 and NSE 25 all declined.

NASI dropped by 0.2 percent whereas NSE 20 and NSE 25 declined by 1.7 and 0.7 percent, respectively. The three took their YTD performance to 14.0, 10.9 and (1.2 percent), respectively.

The decline recorded in NASI was driven by declines in large-cap stocks such as Co-operative Bank, NIC Group, Standard Chartered Bank Kenya (SCBK), and Bamburi, which recorded declines of 15.7, 13.3, 10.3, and 9.0 percent, respectively.

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The declining cap-stocks outweighed the gains made by EABL, Safaricom, Equity Group Holdings and Barclays Bank of 9.0, 3.8, 3.0, and 1.3 percent, respectively.

During the first week of May, however, the equities market recorded a mixed performance, with NASI gaining by 1.3 percent while NSE 20 and NSE 25 declined by 0.6 percent and 0.1 percent, respectively.

The gain in the NASI was largely due to gains recorded in large-cap counters such as NIC Group and Safaricom, which recorded gains of 4.5 percent and 3.8 percent, respectively.

Equities turnover declined by 35.6 percent during the month to 97.6 million US dollars, from 151.5 million dollars in March 2019.

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Foreign investors remained net buyers for the month, with a net buying position of 4.1 million dollars, a 75.8 percent decline from March’s net buying position of 16.8 million dollars.

For the past week, equities turnover increased by 0.1 percent to 22.49 million dollars, from 22.46 million dollars the previous week, bringing the year to date (YTD) turnover to 554.0 million dollars.

Foreign investors remained net buyers for the week, with a net buying position of 1.9 million dollars, a 61.1 percent decline from last week’s net buying position of 5.0 million dollars.

The market is currently trading at a price to earnings ratio (P/E) of 12.4x, 7.4 percent below the historical average of 13.4x, and a dividend yield of 4.8 percent, above the historical average of 3.8 percent.

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Nevertheless, there is still value in the market. The current P/E valuation of 12.4x is 26.4 percent above the most recent trough valuation of 9.8x experienced in the first week of April 2017, and 49.1 percent above the previous trough valuation of 8.3x experienced in December 2011