Gains in Banking Stocks See Equities Market Register Upward Trajectory

During the week, the equities market was on an upward trajectory, thanks to the gains recorded by banking stocks such as ABSA, Standard Chartered Bank Kenya, and Equity Group.

The market saw NASI gain by 0.5 percent while NSE 20 and NSE 25 both gained by 0.9 percent, taking their YTD performance to gains of 23.1 percent, 20.0 percent, and 8.6 percent for NASI, NSE 25, and NSE 20, respectively.

Stocks by ABSA, Standard Chartered Bank Kenya, and Equity Group, gained 8.4 percent, 3.9 percent, and 3.3 percent, respectively.

The gains were however weighed down by stocks such as NCBA and Bamburi, which declined by 2.4 percent and 1.9 percent, respectively.

During the week, equities turnover reduced by 48.5 percent to 21.5 million dollars, from 41.7 million dollars recorded the previous week, taking the YTD turnover to 826.3 million dollars.

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Foreign investors remained net buyers, with a net buying position of 5.1 million dollars, from a net buying position of 7.7 million dollars recorded the previous week, taking the YTD net selling position to 9.4 million dollars.

The market is currently trading at a price-to-earnings ratio (P/E) of 13.4x, 3.8 percent above the historical average of 12.9x, and a dividend yield of 3.1 percent, 0.9 percent points below the historical average of 4.0 percent.

Key to note, NASI’s PEG ratio currently stands at 1.5x, an indication that the market is trading at a premium to its future earnings growth.

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.

Excluding Safaricom, which is currently 61.7 percent of the market, the market is trading at a P/E ratio of 12.2x and a PEG ratio of 1.4x.

The current P/E valuation of 13.4x is 74.3 percent above the most recent trough valuation of 7.7x experienced in the first week of August 2020.