Gains In ABSA Bank, NCBA Group Drive Equities Mixed Performance

The equities market recorded mixed performance with NASI gaining by 0.4 percent while NSE 20 and NSE 25 declined by 0.5 and 0.2 percent respectively, taking YTD performance to losses of 23.3, 12.9, and 17.8 percent for NASI, NSE 20 and NSE 25 respectively.

The equities market performance was mainly driven by gains recorded by stocks such as ABSA Bank, NCBA Group, and Safaricom of 2.6, 1.9, and 1.8 percent, respectively.

The gains were however weighed down by losses recorded by large stocks such as EABL, Equity Group, Bamburi, and KCB Group of 4.3, 1.3, 1.2, and 1.1 percent respectively.

During the week, equities turnover increased by 6.1 percent to USD 9.7 mn from USD 9.2 mn recorded the previous week, taking the YTD turnover to USD 723.0 mn.

Additionally, foreign investors remained net sellers, with a net selling position of USD 2.2 mn, from a net selling position of USD 0.8 mn recorded the previous week, taking the YTD net selling position to USD 186.2 mn.

The market is currently trading at a price-to-earnings ratio (P/E) of 6.9x, 45.3 percent below the historical average of 12.6x, and a dividend yield of 6.1%, 2.0% points above the historical average of 4.1 percent.

Key to note, NASI’s PEG ratio currently stands at 0.9x, an indication that the market is undervalued 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.

Rates in the Fixed Income market have remained relatively stable due to the relatively ample liquidity in the money market.

The government is 14.6 percent ahead of its prorated borrowing target of Kshs 214.1 bn having borrowed Kshs 245.4 bn of the 581.7 billion shillings borrowing target for the FY’2022/2023.

“We expect sustained gradual economic recovery as evidenced by the revenue collections of Kshs 486.0 bn in the FY’2022/2023, equivalent to 22.7 percent of its target of 2.1 trillion shillings.”

Despite the performance, we believe that the projected budget deficit of 6.2 percent is relatively ambitious given the downside risks and deteriorating business environment occasioned by high inflationary pressures.