Equities Performance on a Downward Trend in Week 1 of September

Equities were on a downward trend in the first week of September, with NASI, NSE 20 and NSE 25 declining by 3.4, 1.9 and 3.2 percent, respectively.

This took their Year To Date (YTD) performance to gains/(declines) of 1.5, (14.6) and (4.0 percent), for NASI, NSE 20 and NSE 25, respectively.

According to analysts from Cytonn Investments, the performance in NASI was driven by declines in large-cap stocks such as Equity Group, KCB Group, Safaricom and BAT, which declined by 6.9, 4.9, 4.8, and 3.9 percent, respectively.

The declines over the week were largely due to several counters such as KCB Group and Safaricom, which had their book closures and thus begun trading ex-dividend.

Equities turnover rose by 124.3 percent during the week to USD 30.1 million, from USD 13.4 million the previous week, taking the YTD turnover to USD 988.8 million.

Foreign investors turned out the net sellers for the week, with a net selling position of USD 0.4 million, from a net buying position of USD 3.3 million in the previous week.

The market is currently trading at a price to earnings ratio (P/E) of 11.0x, 17.3 percent below the historical average of 13.3x, and a dividend yield of 5.5 percent, above the historical average of 3.9 percent.

“With the market trading at valuations below the historical average, we believe there is value in the market,” says Cytonn Investments.

The current P/E valuation of 11.0x is 13.4 percent above the most recent trough valuation of 9.7x experienced in the first week of February 2017, and 32.5 percent above the previous trough valuation of 8.3x experienced in December 2011.

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