Equities Market Records Mixed Performance With NSE 25 Gaining

During the week, the equities market recorded mixed performance, with NASI and NSE 25 recording gains of 1.8 and 0.5 percent respectively.

The NSE 20 recorded losses of 0.2 percent, taking their YTD performance to losses of 19.1, 28.9, and 23.9 percent, for NASI, NSE 20, and NSE 25, respectively.

The NASI performance was driven by gains recorded by large-cap stocks, with the highest gains being recorded in EABL, Safaricom, BAT, and NCBA, which gained by 4.8, 4.1, 2.3, and 1.2 percent, respectively.

However, the gains were slowed down by losses recorded by other large-cap stocks, with the highest losses being recorded by Co-operative Bank and Equity Group, which declined by 5.9 and 4.4 percent respectively.

Equities turnover declined by 4.0 percent during the week to USD 30.7 million, from USD 31.9 million recorded the previous week, taking the YTD turnover to USD 920.1 million.

Foreign investors remained net sellers during the week, with the net selling position decreasing by 23.2 percent to USD 12.7 million, from a net selling position of USD 16.5 million recorded the previous week, taking the YTD net selling position to USD 266.0 million.

The market is currently trading at a price to earnings ratio (P/E) of 7.8x, 40.3 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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