Equities Markets End April In Uncertainty As COVID-19 Reigns

During the month of April, the equities market recorded mixed performances, with both NASI and NSE 25 recording gains of 5.9 percent, while NSE 20 declined by 0.4 percent.

The equities market performance during the month was driven by gains recorded by EABL, Equity Group, Safaricom, and KCB, of 15.6, 10.9, 7.8, and 5.7 percent respectively.

During the week, the market recorded mixed performance, with both NASI and NSE 25 recording gains of 2.9 percent and 3.7 percent respectively.

The NSE 20 declined by 0.5 percent taking their YTD performance to losses of 16.1, 19.7, and 26.2 percent respectively.

The loss recorded by NSE 20 breaches the threshold of a bear market, which is a condition in which securities prices fall by 20.0 percent or more, from recent highs, lasting for more than two months.

The performance of the NASI was driven by gains recorded by large-cap stocks such as EABL, Equity Group, Safaricom, and Co-operative Bank, of 13.7, 8.8, 3.4, and 2.0 percent respectively.

Equities turnover declined by 39.3 percent during the month to USD 118.5 million from USD 195.2 million in March 2020.

During the month, foreign investors remained net sellers with a net selling position of USD 36.4 million compared to March’s net selling position of USD 100.5 million.

During the week, equities turnover declined by 62.5% to USD 15.0 million from USD 39.9 million recorded the previous week, taking the YTD turnover to USD 557.1 million.

Foreign investors remained net sellers during the week, with the net selling position declining by 54.7 percent to USD 5.9 million from a net selling position of USD 13.0 million recorded the previous week.

The market is currently trading at a price to earnings ratio (P/E) of 8.8x, 33.0 percent below the historical average of 13.2x, and a dividend yield of 5.8 percent, 1.8 percentage 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. The current P/E valuation of 8.8x is 5.0 percent above the most recent trough valuation of 8.4x experienced in the last week of March 2020, and 6.3 percent above the previous trough valuation of 8.3x experienced in December 2011.