Equities Market Still Posting Mixing Reactions Weeks Down The Line

The equities market recorded mixed performance, with both NASI and NSE 20 gaining by 0.3 percent, while NSE 25 remained unchanged from what was recorded the previous week.

This week’s performance took the indices YTD performance to gains of 8.9, 0.8, and 6.6 percent for NASI, NSE 20, and NSE 25, respectively.

The equities market performance was driven by gains recorded by stocks such as Bamburi, Diamond Trust Bank (DTB-K), and Safaricom which gained by 6.0, 3.5, and 1.0 percent, respectively.

The gains were however weighed down by losses recorded by stocks such as BAT and NCBA Group which declined by 8.7 and 7.3 percent, respectively.

Equities turnover increased by 1.7 percent during the week to USD 22.3 million, from USD 21.9 million recorded the previous week, taking the YTD turnover to USD 357.3 million.

Foreign investors remained net sellers, with a net selling position of USD 0.8 million, from a net selling position of USD 3.2 million recorded the previous week, taking the YTD net selling position to USD 17.8 million.

The market is currently trading at a price-to-earnings ratio (P/E) of 12.6x, 2.8 percent below the 12-year historical average of 12.9x, and a dividend yield of 3.7 percentage, 0.4 percent points below the historical average of 4.1 percent.

Read More:

• Equities Sent Mixed Signals In First 3 Months Of 2021
• Equities Markets Colour August With Mixed Performance

Key to note, NASI’s PEG ratio currently stands at 1.4x, an indication that the market is trading at a premium to its future earnings growth which means that some of the stocks are expensive.

Basically, a PEG ratio greater than 1.0x indicates the market may be overvalued while a PEG ratio less than 1.0x indicates that the market is undervalued.

The current P/E valuation of 12.6x is 63.0% above the most recent trough valuation 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.