Foreign Investors Maintain Net Buying Position at the NSE Equities Market

During the month ended, January 2020, foreign investors remained net buyers for the month in the equities market, a trend also observed in the month of December 2019.

Foreign investors recorded a net buying position of USD 5.2 million, a drop from December’s net buying position of USD 10.6 million.

The equities market recorded a downward trend for the month of January, with NASI, NSE 20 and NSE 25 decreasing by (2.6), (2.0) and (1.9 percent), respectively.

According to Cytonn Investment’s weekly report, the decrease recorded in NASI was driven by declines in large-cap stocks such as Bamburi, Co-operative Bank, Equity Group, and Safaricom.

Bamburi, Co-operative Bank, Equity Group, and Safaricom recorded declines of (9.4), (6.7), (6.5) and (3.3 percent), respectively.

The declines in large-cap stocks was a result of price corrections in banking stocks and foreign selling mainly in Safaricom.

In the last week of January, the market was on a downward trend, with NASI, NSE 20 and NSE 25 declining by (1.8), (1.6), and (1.3 percent), respectively, taking their YTD performance to losses of (2.6), (2.0) and (1.9 percent), respectively.

The decline in NASI was largely due to losses recorded in large-cap counters such as DTBK, Stanchart, Equity Group and Safaricom, which recorded losses of (4.1), (3.4), (2.9), and (2.7 percent), respectively.

Equities turnover increased by 6.1 percent during the month to USD 122.0 million, from USD 114.9 million in December 2019.

During the week, equities turnover decreased by 11.8 percent to USD 24.8 million, from USD 28.2 million the previous week, bringing the year to date (YTD) turnover to USD 122.0 million.

Foreign investors were net sellers during the week, with a net selling position of USD 3.9 million, from last week’s net buying position of USD 1.6 million.

The market is currently trading at a price to earnings ratio (P/E) of 11.2x, 15.8 percent below the historical average of 13.2x, and a dividend yield of 5.8 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,” say analysts from Cytonn.

The current P/E valuation of 11.2x is 15.5 percent above the most recent trough valuation of 9.7x experienced in the first week of February 2017, and 34.9 percent above the previous trough valuation of 8.3x experienced in December 2011.

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