Equities: Coronavirus in Kenya Triggers Panic Sell-off by Investors

The announcement by Health Cabinet Secretary Mutahi Kagwe of a positive Coronavirus case in Kenya in the week ended triggered a panic sell-off by equities investors at the NSE.

The NASI index recorded losses of 14.4 percent where large-cap stocks across all sectors such as Safaricom, BAT, KCB, and Equity Bank recorded losses of 17.5 percent, 16.5 percent, 15.1 percent, and 14.6 percent, respectively.

NSE 20 and NSE 25 also recorded losses of 11.5 percent, and 13.9 percent, respectively taking their Year To Date performances to losses of 20.0 percent, and 18.6 percent respectively.

According to analysts from Cytonn Investments, the YTD loss recorded by NSE 20 breach the threshold of a bear market, which is a condition in which securities prices fall by 20.0 percent or more

The Nairobi Securities Exchange in a public notice informed market participants and stakeholders that trading at the exchange had been halted on Friday 13^th March 2020 after the NSE 20 dropped more than 5.0 percent due to the coronavirus pandemic.

As per the provisions of Rule 9.4.1 (ii) of the NSE Equity Trading Rules, when the NSE 20 Share Index decreases by more than 5.0% at the opening session compared to its closing value or during the continuous session, compared to its opening value, the Exchange may temporarily halt trading for not more than 30 minutes.

Trading has, however, resumed today on Monday, 16^th March 2020.

Equities turnover increased by 28.2 percent during the week to USD 54.7 million, from USD 42.7 million recorded the previous week, taking the YTD turnover to USD 341.0 million.

Foreign investors remained net sellers for the week, with a net selling position of USD 32.2 million from a net selling position of USD 18.5 million recorded the previous week. The trend reflects the global equity markets with foreign investors disposing of riskier assets in favor of safe havens.

The market is currently trading at a price to earnings ratio (P/E) of 9.9x, 25.2 percent below the historical average of 13.2x, and a dividend yield of 7.1 percent, 3.1 percent points above the historical average of 4.0 percent.

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

The current P/E valuation of 9.9x is 1.9 percent above the most recent trough valuation of 9.7x experienced in the first week of February 2017, and 19.0 percent above the previous trough valuation of 8.3x experienced in December 2011.

Read Also: T-Bills Swim Above 200% In The Wake Of Confirmed Coronavirus Case