Equities On A Downward Trajectory During The Week

The equities market was on a downward trajectory last week with NASI, NSE 20, and NSE 25 declining by 0.3, 1.6, and 1.2 percent, respectively, taking their YTD performance to gains of 9.5, 1.6, and 7.5 percent for NASI, NSE 20, and NSE 25, respectively.

The equities market performance was driven by losses recorded by banking stocks such as Diamond Trust Bank (DTB-K), NCBA Group, and ABSA Bank, which declined by 9.8, 7.4, and 6.1 percent following the results releases which indicated declines in their profitability.

The losses were, however, mitigated by gains recorded by large-cap stocks such as Standard Chartered Bank, which gained by 9.0 percent.

Equities turnover increased by 41.9 percent during the week to USD 21.9 million, from USD 15.5 million recorded the previous week, taking the YTD turnover to USD 265.2 mn.

Foreign investors remained net buyers, with a net buying position of USD 4.4 million, from a net buying position of USD 0.4 million recorded the previous week, taking the YTD net selling position to USD 0.6 million.

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• Equities Markets Still On Downward Trajectory For Second Week
• Equities Markets On A Downward Trajectory During The Week

The market is currently trading at a price-to-earnings ratio (P/E) of 12.5x, 3.0% below the 11-year historical average of 12.9x.

Key to note, the current P/E is at the highest it has been since 20^th December 2019. The increase in the P/E ratio is attributable to the price rally witnessed this month in comparison to a general decline in Earnings Per Share (EPS).

The average dividend yield is currently at 3.6 percent, 0.6 percentage points below last week’s dividend yield which came in at 4.2, and 0.5 percentage points above the historical average of 4.1 percent.

With the market trading at valuations below the historical average, we believe that there are pockets of value in the market for investors with a higher risk tolerance.

The current P/E valuation of 12.5x is 62.7 percent above the most recent valuation trough of 7.7x experienced in the first week of August 2020.