Equities Displayed a Downward Trend in November as Market Re-Adjusts

Market analysts say performances at the equities market were on a downward trend in the month of November attributed to losses in large caps.

According to Cytonn Investments, NASI, NSE 20 and NSE 25 declined by 1.0, 1.0, and 0.2 percent, respectively.

The decline was driven by losses in large-cap bank stocks such as NCBA Group, Barclays Bank of Kenya, Standard Chartered Bank of Kenya and KCB Group, which recorded losses of 10.7, 6.4, 5.8 and 3.4 percent, respectively, owing to the market re-adjusting after the bullish trend in October owing to expectations of the repeal of the interest rate cap.

While the overall performance in November was subdued, the last week of the month ended recorded an upward trend, with NASI and NSE 25 both increasing by 2.0 percent, whereas NSE 20 declined slightly by 0.005 percent.

Owing to the upward trend recorded in the last week of November, the Year to Date (YTD) performance of the equities market documented gains/ (losses) of 12.5, 10.3, and (7.6 percent) for NASI, NSE 25 and NSE 20, respectively.

Equities turnover increased by 5.1 percent during the month to USD 165.8 million, from USD 157.8 million in October 2019.

During the week, equities turnover increased by 29.6 percent to USD 32.2 million, from USD 24.9 million the previous week, bringing the year to date (YTD) turnover to USD 1,383.9 million.

Foreign investors became net buyers for the week, with a net buying position of USD 0.7 million, from last week’s net selling position of USD 1.4 million.

The market is currently trading at a price to earnings ratio (P/E) of 12.0x, 9.9 percent below the historical average of 13.3x, and a dividend yield of 6.0 percent, 2.1 percent points 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 12.0x is 23.5 percent above the most recent trough valuation of 9.7x experienced in the first week of February 2017, and 44.3 percent above the previous trough valuation of 8.3x experienced in December 2011.

Read Also: Foreigners Assume Net Buying As Turnover Spikes By 115.87%