Equities Market Still Posting Mixed Reactions

During the week, the equities market recorded mixed performance, with NASI gaining by 0.6 percent, while NSE 20 declined by 0.2 percent. NSE 25, on the other hand, remained unchanged.

This week’s performance took the YTD performance to gains of 0.5 and 0.1 percent respectively, for NASI and NSE 25, while NSE 20 recorded a loss of 0.9 percent.

The equities market performance was driven by gains recorded by large-cap stocks such as Safaricom, Standard Chartered Bank Kenya (SCBK), and Equity of 1.3, 1.1, and 0.5 percent, respectively.

The gains were however weighed down by losses recorded by stocks such as KCB, Diamond Trust Bank (DTB-K), ABSA, and EABL which declined by 3.6, 2.9, 2.1, and 2.0 percent, respectively.

During the week, equities turnover declined by 16.7 percent to USD 23.1 mn, from USD 27.7 mn recorded the previous week, taking the YTD turnover to USD 118.3 mn.

Foreign investors remained net buyers, with a net buying position of USD 2.5 mn, from a net buying position of USD 4.6 mn recorded the previous week, taking the YTD net buying position to USD 1.8 mn.

The market is currently trading at a price-to-earnings ratio (P/E) of 11.4x, 11.6 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 1.5x, 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.

The current P/E valuation of 11.4x is 48.3 percent 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.

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