NSE 25 And NASI Shine, NSE 20 Marginally Dips

During the week, the equities market recorded mixed performance, with NSE 25 and NASI gaining by 0.9 percent and 0.5 percent respectively, while NSE 20 declined marginally by 0.1 percent.

This week’s performance took their YTD performance to gains of 7.6 and 6.3 percent for NASI and NSE 25, respectively, with NSE 20 shedding by 1.0 percent on a YTD basis.

The equities market performance was driven by gains recorded by banking stocks such as NCBA, Equity, and KCB of 4.2, 2.4, and 2.0 percent, respectively.

The gains were however weighed down by losses recorded by other large-cap stocks such as EABL and Standard Chartered Bank (SCB-K) which declined by 0.5 and 0.4 percent, respectively.

During the week, equities turnover declined by 41.6 percent to USD 20.5 mn, from USD 35.0 mn recorded the previous week, taking the YTD turnover to USD 1.2 bn.

Foreign investors remained net sellers, with a net selling position of USD 4.3 mn, from a net selling position of USD 12.5 mn recorded the previous week, taking the YTD net selling position to USD 84.8 mn.

The market is currently trading at a price-to-earnings ratio (P/E) of 12.0x, 7.0 percent below the historical average of 12.9x, and a dividend yield of 3.5 percent, 0.5 percentage points below the historical average of 4.0 percent.

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.

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 12.0x is 56.2 percent above the most recent trough valuation of 7.7x experienced in the first week of August 2020.