Equities Trajected Upwards Last Week With Gains In Large Stocks

By Soko Directory Team / Published August 15, 2022 | 9:15 am

KEY POINTS

The market is currently trading at a price-to-earnings ratio (P/E) of 7.8x, 39.1% below the historical average of 12.7x, and a dividend yield of 5.6%, 1.6% points above the historical average of 4.0%.

KEY TAKEAWAYS

During the week, equities turnover declined by 33.1% to USD 9.1 mn, from USD 13.6 mn recorded the previous week, taking the YTD turnover to USD 556.3 mn.

During the week, the equities market was on an upward trajectory with NASI, NSE 20, and NSE 25 gaining by 3.4%, 4.2%, and 3.6%, respectively, taking their YTD performance to losses of 12.1%, 6.0%, and 9.0%, for NASI, NSE 20 and NSE 25, respectively.

The equities market performance was mainly driven by gains recorded by large-cap stocks such as Co-operative Bank, ABSA, Equity Group, and Diamond Trust Bank (DTB-K) of 7.6%, 5.3%, 4.7%, and 3.6%, respectively.

During the week, equities turnover declined by 33.1% to USD 9.1 mn, from USD 13.6 mn recorded the previous week, taking the YTD turnover to USD 556.3 mn.

Additionally, foreign investors remained net sellers, with a net selling position of USD 4.1 mn, from a net selling position of USD 4.3 mn recorded the previous week, taking the YTD net selling position to USD 139.4 mn.

The market is currently trading at a price-to-earnings ratio (P/E) of 7.8x, 39.1% below the historical average of 12.7x, and a dividend yield of 5.6%, 1.6% points above the historical average of 4.0%.

Key to note, NASI’s PEG ratio currently stands at 1.0x, an indication that the market is fairly valued relative to its future growth.

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 charts below indicate the historical P/E and dividend yields of the market:

At the same time, rates in the Fixed Income market have remained relatively high due to the relatively heightened perceived risk by investors.

As it is still early in the financial year, the government is 54.1% behind its prorated borrowing target of Kshs 67.1 bn having borrowed Kshs 30.8 bn of the Kshs 581.7 bn borrowing target for the FY’2022/2023.

“We however expect support from the IMF and World Bank to finance some of the government projects and thus help maintain a stable interest rate environment since the government is not desperate for cash. Owing to this, our view is that investors should be biased towards short-term fixed-income securities to reduce duration risk,” said Cytonn.

About Soko Directory Team

Soko Directory is a Financial and Markets digital portal that tracks brands, listed firms on the NSE, SMEs and trend setters in the markets eco-system.Find us on Facebook: facebook.com/SokoDirectory and on Twitter: twitter.com/SokoDirectory

View other posts by Soko Directory Team