NASI And NSE 25 Up By 1.4% And 1.7%, NSE 20 Down By 0.1%

The equities market recorded mixed performance last week with NASI and NSE 25 recording gains of 1.4 and 1.7 percent. The NSE 20 declined marginally by 0.1 percent.

This took the YTD performance of the equities to gains of 20.2, 17.7, and 10.1 percent for NASI, NSE 25, and NSE 20, respectively.

The equities market performance was mainly driven by gains recorded by large-cap stocks such as Equity Group, KCB Group, and Safaricom, which gained by 4.4, 4.2, and 1.6 percent, respectively.

The gains were however weighed down by losses recorded by stocks such as BAT, Diamond Trust Bank (DTB-K), and Bamburi which declined by 2.6, 2.0, and 1.6 percent, respectively.

During the week, equities turnover increased by 22.0 percent to USD 22.2 mn, from USD 18.2 mn recorded the previous week, taking the YTD turnover to USD 884.8 mn.

Foreign investors remained net buyers, with a net buying position of USD 1.9 mn, from USD 2.2 mn recorded the previous week, taking the YTD to a net selling position of USD 7.2 mn.

The market is currently trading at a price-to-earnings ratio (P/E) of 13.5x, 4.1 percent above the historical average of 12.9x, and a dividend yield of 3.1 percent, 0.9 percentage 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 61.5 percent of the market, the market is trading at a P/E ratio of 12.3x and a PEG ratio of 1.4x.

The current P/E valuation of 13.5x is 74.8 percent above the most recent trough valuation of 7.7x experienced in the first week of August 2020.

In the money markets, 3-month bank placements ended the week at 7.7 percent while the yield on the 91-day T-bill increased by 8.9 bps to 6.9 percent.

The average yield of the Top 5 Money Market Funds remained at 9.8 percent, as was recorded the previous week. The yield on the Cytonn Money Market Fund also remained unchanged at 10.6 percent as was recorded the previous week.