Equities Market: NSE 20 And 25 Post Gains During The Week

During the week, the equities market recorded mixed performance, with NSE 20 and NSE 25 recording gains of 0.4 percent and 0.5 percent, respectively.

NASI recorded a decline of 0.1 percent, taking their YTD performance to losses of 20.5, 28.1, and 24.2 percent, for NASI, NSE 20, and NSE 25, respectively.

The NASI performance was driven by losses recorded by large-cap stocks, with the highest declines being recorded in NCBA, Bamburi, ABSA, and Safaricom, which lost by 4.5, 3.9, 3.4, and 1.8 percent, respectively.

However, the decline was slowed down by gains recorded by other large-cap stocks, with the highest gains being recorded in Equity Group, KCB, and EABL, which gained by 6.8, 3.5, and 1.3 percent, respectively.

Equities turnover declined by 20.3 percent during the week to USD 31.9 million, from USD 40.1 million recorded the previous week, taking the YTD turnover to USD 889.4 million.

Foreign investors remained net sellers during the week, with the net selling position decreasing by 12.3 percent to USD 16.5 million, from a net selling position of USD 18.8 million recorded the previous week, taking the YTD net selling position to USD 253.4 million.

The market is currently trading at a price to earnings ratio (P/E) of 7.8x, 40.4 percent below the historical average of 13.1x.

The average dividend yield is currently at 5.3 percent, unchanged from the previous week, and 1.3 percentage points above the historical average of 4.0 percent.

With the market trading at valuations below the historical average, we believe there are pockets of value in the market for investors with higher risk tolerance and are willing to wait out the pandemic.

The current P/E valuation of 7.8x is at par with the most recent valuation trough of 7.8x experienced in the second week of July 2020. The charts below indicate the historical P/E and dividend yields of the market.

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