Equities Market Register an Upward Trend in Week 1 of July

During the first week of July, the equities markets were on an upward trend with NASI, NSE 20 and NSE 25 gaining by 0.1, 1.2, and 0.9 percent, respectively.

This trend took their YTD performance to gains / (losses) of 7.4 percent, (5.3 percent) and 1.9 percent, for NASI, NSE 20 and NSE 25, respectively.

According to analysts from Cytonn Investments, the performance in NASI was driven by gains in KCB Group, Equity Group, Co-op Bank, and BAT, which gained by 4.6, 2.7, 2.1, and 1.0 percent, respectively.

Equities turnover declined by 22.6 percent during the week to USD 20.9 million, from USD 26.9 million the previous week, taking the YTD turnover to USD 791.2 million.

Foreign investors remained net sellers for the week, with the net selling position increasing by 185.4 percent to USD 4.9 million, from USD 2.5 million the previous week.

The market is currently trading at a price to earnings ratio (P/E) of 11.7x, 3.2 percent below the historical average of 13.3x, and a dividend yield of 5.3 percent, 1.5 percent points above the historical average of 3.8 percent.

With the market trading at valuations below the historical average, we believe there is value in the market.

The current P/E valuation of 11.6x is 19.4 percent above the most recent trough valuation of 9.7x experienced in the first week of February 2017, and 39.4 percent above the previous trough valuation of 8.3x experienced in December 2011.

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