Equities Market On A Downward Trajectory, Again

Last week, the equities market was on a downward trajectory, with both the NASI and NSE 20 declining by 0.2 percent while NSE 25 declined by 0.8 percent respectively, taking their YTD performance to losses of 13.6, 32.7, and 20.6 percent, for NASI, NSE 20 and NSE 25 respectively.

The equities market performance was driven by losses recorded by Standard Chartered Bank, Equity Group, KCB Group, and ABSA Bank of 4.5, 3.9, 3.5, and 3.2 percent respectively.

The losses were however mitigated by gains recorded by Bamburi, NCBA Group, and Co-operative Bank of 13.3, 3.2, and 2.2 percent, respectively.

Equities turnover increased by 4.9 percent during the week to USD 20.0 million, from USD 19.0 million recorded the previous week, taking the YTD turnover to USD 1.3 billion.

Foreign investors turned net buyers during the week, with a net buying position of USD 0.2 million, from a net selling position of USD 0.1 million recorded the previous week, taking the YTD net selling position to USD 277.9 million.

The market is currently trading at a price to earnings ratio (P/E) of 10.0x, 22.6 percent below the 11-year historical average of 13.0x.

The average dividend yield is currently at 4.9 percent, unchanged from what was recorded the previous week, and 0.9 percentage points above the historical average of 4.0 percent.

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

Cytonn added that the current P/E valuation of 10.0x is 30.3% above the most recent valuation trough of 7.7x experienced in the first week of August 2020. The charts below indicate the historical P/E and dividend yields of the market.