Equities Recover from January’s Bleak Performance in Week 1 of February

The equities market started off the month on a high note after recording an upward trajectory in the first week of February.

According to Cytonn Investments, NASI, NSE 20 and NSE 25 recorded gains of 4.0, 0.1 and 2.6 percent, respectively.

This is a good indication, considering that the equities market recorded a downward trend for the month of January.

The upward trajectory in the equities took their YTD performance to gains/ (losses) of 1.3, (2.0) and 0.6 percent, for the NASI, NSE 20 and NSE 25, respectively.

Analysts from Cytonn say that the performance in NASI was driven by gains recorded by large-cap stocks such as Safaricom, Equity, Standard Chartered Bank Kenya and EABL of 8.0, 4.0, 4.0 and 3.5 percent, respectively.

Equities turnover increased by 43.2 percent during the week to USD 35.6 million, from USD 24.8 million recorded the previous week, taking the YTD turnover to USD 157.5 million.

Foreign investors turned net buyers for the week, with a net buying position of USD 1.1 million from a net selling position of USD 3.9 million recorded the previous week.

The market is currently trading at a price to earnings ratio (P/E) of 11.6x, 12.1 percent below the historical average of 13.2x, and a dividend yield of 5.6 percent, 1.7 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 11.6x is 19.6 percent above the most recent trough valuation of 9.7x experienced in the first week of February 2017, and 39.8 percent above the previous trough valuation of 8.3x experienced in December 2011.

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