Equities Record Poor Performance in Q’3 2019 Due to Declines in Large Caps

The equities market has recorded poor performance for Q’3 2019 according to the latest report released by Cytonn Investments.

According to the weekly report, during Q3’2019, the equities market was on a downward trend, with NASI, NSE 20 and NSE 25 declining by 3.0, 8.3, and 4.3 percent, respectively.

This performance took their Year To Date (YTD) performance as at the end of September to gains and losses of 3.6, (14.2 percent) and (2.9 percent) for NASI, NSE 20 and NSE 25, respectively.

Analysts from Cytonn Investments attribute the equities market performance during the quarter to declines in large caps such as Bamburi, Equity Group, and Safaricom, which declined by 17.9, 3.9, and 2.1 percent, respectively.

During the week, however, the equities market was on an upward trend, with NASI, NSE 20 and NSE 25 gaining by 1.8, 1.6, and 1.5 percent, respectively, taking their YTD performance to gains and losses of 4.8 percent, (13.9 percent) and (1.3 percent), respectively.

The performance in NASI during the week was driven by gains in Safaricom, BAT, Co-operative Bank of Kenya, and Standard Chartered Bank, which gained by 3.5 percent, 2.9 percent, 2.1 percent, and 1.9 percent, respectively.

Equities turnover declined by 7.5 percent during the quarter to USD 289.6 million, from USD 313.1 million recorded in Q2’2019, taking the YTD turnover to USD 1.1 bn.

During the week, equities turnover increased by 1.5 percent to USD 25.6 million, from USD 25.2 million the previous week. In the quarter under review, foreign investors were net buyers, with a net buying position of USD 0.8 million, a 9.4 percent decline from the net buying position of USD 14.9 million recorded in Q2’2019.

During the week, foreign investors remained net buyers for the week, with a net buying position of USD 2.2 million, a 13.6 percent decline from a net buying position of USD 2.6 million the previous week.

The market is currently trading at a price to earnings ratio (P/E) of 11.2x, 15.5 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.

The current P/E valuation of 11.2x is 15.9 percent above the most recent trough valuation of 9.7x experienced in the first week of February 2017, and 35.4 percent above the previous trough valuation of 8.3x experienced in December 2011.

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