Equities Market Was On A Free-Fall In January

During the month of January, the equities market was on a downwards trajectory, with NASI, NSE 20, and NSE 25 declining by 1.9, 0.7, and 1.7 percent, respectively.

The equities market performance was driven by losses recorded by large-cap stocks such as Equity, Safaricom, Diamond Trust Bank (DTB-K), and KCB of 4.3, 2.8, 2.1, and 1.0 percent respectively.

The losses were however mitigated by gains recorded by BAT, Standard Chartered Bank, Bamburi, and NCBA which gained by 6.0, 2.9, 2.4, and 1.6 percent, respectively.

During the week, the equities market was on an upward trajectory, with NASI, NSE 20, and NSE 25 gaining by 3.7, 1.4, and 3.2 percent, respectively,

This took their YTD performance to losses of 0.1 and 0.7 percent for NASI and NSE 20, respectively, while NSE 25 gained marginally by 0.04 percent.

The equities market performance was driven by gains recorded by large-cap stocks such as Equity Group, Safaricom, KCB, Bamburi, and Standard Chartered Bank of 5.5, 5.0, 4.9, 3.6, and 3.2 percent, respectively. The gains were however weighed by losses recorded by stocks such as Stanbic Holdings of 5.2 percent.

Equities turnover declined by 21.5 percent during the month to USD 72.7 mn, from USD 92.6 mn recorded in December 2021.

Foreign investors remained net sellers during the month, with a net selling position of USD 3.7 million, compared to December’s net selling position of USD 25.5 million.

During the week, equities turnover increased by 19.9 percent to USD 27.7 mn, from USD 23.1 mn recorded the previous week, taking the YTD turnover to USD 95.3 mn.

Foreign investors turned net buyers, with a net buying position of USD 4.6 mn, from a net selling position of USD 1.3 mn recorded the previous week, taking the YTD net selling position to USD 0.8 mn.

The market is currently trading at a price-to-earnings ratio (P/E) of 11.3x, 12.4 percent below the historical average of 12.9x, and a dividend yield of 3.6 percent, 0.4 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.

The current P/E valuation of 11.3x is 46.9 percent above the most recent trough valuation of 7.7x experienced in the first week of August 2020.