Equities Plunged During The Week As Huge Stocks Took A Hit

The equities market was on a downward trajectory with NASI, NSE 20, and NSE 25 declining by 3.3, 1.2, and 1.8 percent, respectively, taking the YTD performance to losses of 15.3, 4.9, and 8.6 percent for NASI, NSE 20 and NSE 25, respectively.

The equities market performance was mainly driven by losses recorded by large-cap stocks such as Safaricom and EABL of 7.3 and 6.1 percent, respectively, and banking stocks such as KCB Group and ABSA Bank Kenya of 2.8 percent each.

The losses were however mitigated by gains recorded by stocks such as NCBA Group, Equity Group, and DTBK of 5.4, 1.5, and 1.4 percent, respectively.

During the week, equities turnover decreased by 39.2 percent to USD 4.7 mn from USD 7.7 mn recorded the previous week, taking the YTD turnover to USD 372.2 mn.

Foreign investors turned net sellers, with a net selling position of USD 1.0 mn, from a net buying position of USD 1.5 mn recorded the previous week, taking the YTD net selling position to USD 41.9 mn.

The market is currently trading at a price-to-earnings ratio (P/E) of 5.3x, 57.4 percent below the historical average of 12.4x.

The dividend yield stands at 8.8 percent, 4.6 percentage points above the historical average of 4.2 percent. Key to note, NASI’s PEG ratio currently stands at 0.7x, an indication that the market is undervalued relative to its future growth.

A PEG ratio greater than 1.0x indicates the market is overvalued while a PEG ratio less than 1.0x indicates that the market is undervalued.

Rates in the Fixed Income market have been on an upward trend given the continued government’s demand for cash and the relatively tightened liquidity in the money market.

The government is 11.0 percent ahead of its prorated borrowing target of Kshs 346.9 bn having borrowed Kshs 385.1 bn of the revised domestic borrowing target of Kshs 425.1 bn as per the March 2023 revised domestic borrowing target for FY’2022/23.

“We believe that the projected budget deficit of 5.7 percent is relatively ambitious given the downside risks and deteriorating business environment occasioned by high inflationary pressures.”

Further, revenue collections are lagging behind, with total revenue as of March 2023 coming in at Kshs 1.4 tn in the FY’2022/2023, equivalent to 65.9% of its revised target of Kshs 2.2 tn and 87.9 percent of the prorated target of Kshs 1.6 tn.

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