Equities Bloom As All Three Indices Gain During The Week

During the week, the equities market was on an upward trajectory, with NSE 25, NASI, and NSE 20 all recording gains of 1.1 percent

The performance took their YTD performance to losses of 15.3, 20.5, and 29.3 percent, for NASI, NSE 25, and NSE 20, respectively.

The performance was driven by gains recorded by large-cap stocks, with the highest gains being recorded in Equity Group, KCB Group, Standard Chartered Bank, and Safaricom, which gained by 3.8, 3.1, 2.2, and 1.5 percent, respectively.

Equities turnover declined by 18.3 percent during the week to USD 22.3 million from USD 27.4 million recorded the previous week, taking the YTD turnover to USD 1.1 billion.

Foreign investors remained net buyers during the week, with a net buying position of USD 2.0 million, from a net buying position of USD 5.9 million recorded the previous week, taking the YTD net selling position to USD 258.4 million.

The market is currently trading at a price to earnings ratio (P/E) of 9.4, 27.8 percent below the 11-year historical average of 13.0x.

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The average dividend yield is currently at 5.0 percent, down from 5.1percent recorded the previous week and 1.0 percent points above the historical average of 4.0 percent. The decline in dividend yield is attributable to price gains recorded by most stocks.

‘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,” said analysts from Cytonn Investments.

The current P/E valuation of 9.4x is 21.9 percent above the most recent valuation trough of 7.7x experienced in the first week of August 2020.

During the week, the yields on the 10-year and 30-year Eurobonds both increased marginally by 0.1 percentage points to close at 6.7 percent and 8.0 percent, respectively from 6.6 percent and 7.9 percent, recorded the previous week.

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