Share Value Market Inconsistent as Equities Register a Downward Trend

During the week, the share value market at the Nairobi Securities Exchange (NSE) was on a downward trend where all the three equities registered a declining performance.

NASI, NSE 20 and NSE 25 all declined by 4.3, 1.5, and 4.1 percent, respectively, taking their YTD performance to gains of 9.0 percent, (2.7 percent) and 6.4 percent, for NASI, NSE 20 and NSE 25, respectively.

The performance in NASI was driven by declines in large-cap stocks such as Equity Group, NIC Group, EABL, and Safaricom, which declined by 6.8, 6.7, 4.5, and 4.5 percent, respectively.

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The declines over the last two weeks were largely due to several counters having their book closures and thus begun trading ex-dividend.

Equities turnover declined by 18.3 percent during the week to 18.4 million US dollars, from 22.5 million dollars the previous week, taking the YTD turnover to 572.3 million dollars.

Foreign investors turned net sellers for the week, with a net selling position of 0.5 million dollars, from a net buying position of 1.9 million dollars.

The market is currently trading at a price to earnings ratio (P/E) of 12.0x, 10.3 percent below the historical average of 13.4x, and a dividend yield of 4.9 percent, above the historical average of 3.8 percent.

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With the market trading at valuations below the historical average, Cytonn Investments holds that there is still value in the market.

The current P/E valuation of 12.0x is 23.6 percent above the most recent trough valuation of 9.7x experienced in the first week of February 2017, and 44.5 percent above the previous trough valuation of 8.3x experienced in December 2011.