Equities in February Replica January’s Downward Performance, What is ailing the Market?

The month of February was no different than that of January after the equities market registered an overall downward performance.

According to stats released by Cytonn Investment’s weekly report, NASI, NSE 20 and NSE 25 decreased by (8.3), (10.1) and (9.0 percent), respectively.

The downward performance in the equities market is attributable to the continued market sell-off as profit-taking investors move to safe havens.

Equities turnover decreased by 0.4 percent during the month to USD 121.5 million, from USD 122.0 million in January 2020.

During the month, foreign investors turned net sellers with a net selling position of USD 26.3 million, compared to January’s net buying position of USD 5.2 million.

Week’s Performance

During the last week of February, the market was also on a downward trend, with NASI decreasing by (6.2 percent), while both NSE 20 and NSE 25 declined by (6.5 percent), taking their YTD performance to losses of (10.7), (12.0) and (10.7 percent), respectively.

The decline in NASI was largely due to losses recorded in large-cap counters such as DTB Kenya, Bamburi, KCB and Co-operative Bank, which recorded losses of (10.7), (10.4), (10.1), and (8.8 percent), respectively.

During the week, equities turnover increased by 19.3 percent to USD 29.0 million, from USD 24.3 million the previous week, bringing the year to date (YTD) turnover to USD 243.5 million.

Foreign investors remained net sellers during the week, with a net selling position of USD 3.1 million, from last week’s net selling position of USD 14.7 million.

The Market in Focus

The market is currently trading at a price to earnings ratio (P/E) of 10.6x, 20.2 percent below the historical average of 13.2x, and a dividend yield of 6.3 percent, 2.4 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,” said analysts from Cytonn

The current P/E valuation of 10.6x is 9.0 percent above the most recent trough valuation of 9.7x experienced in the first week of February 2017, and 27.3 percent above the previous trough valuation of 8.3x experienced in December 2011.

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