NCBA Bank Among Top Stocks on the Nairobi Stock Exchange To Buy Today

The Nairobi Stock Exchange (NSE) is a leading African exchange, based in Kenya, that offers an automated platform for listing and trading securities. The NSE has a six-decade heritage in listed equity and debt securities and has been one of the best-performing markets in Africa in recent years1.

However, the NSE has also faced some challenges due to the Covid-19 pandemic, political uncertainty, currency volatility, tax policy changes, and inept and lazy management.  In this article, Soko Directory will look at some of the top stocks on the NSE that have strong fundamentals, attractive valuations, and promising future prospects. We will also examine the impact of the proposed tax proposals on the NSE and its listed companies.

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Best-performing stocks in the NSE in 2022

According to a report by Mystocks.co.ke, the following are some of the best-performing stocks in the NSE in 2022 based on their year-to-date (YTD) returns as of March 27, 2023:

These stocks have outperformed the NSE All Share Index (NASI), which has declined by 2.17% YTD, and the NSE 20 Share Index (NSE20), which has dropped by 9.87% YTD.

Factors to consider when buying stocks on the NSE

While past performance is not a guarantee of future results, it can indicate some of the strengths and weaknesses of a company. However, investors should also consider other factors when buying stocks on the NSE, such as:

1. Fundamentals: This refers to the financial health and growth potential of a company based on its income statement, balance sheet, and cash flow statement. Some of the key indicators to look at include earnings per share (EPS), return on equity (ROE), dividend yield, the price-to-earnings ratio (P/E), debt-to-equity ratio (D/E), and free cash flow (FCF).
2. Market trends: This refers to the direction and momentum of the overall market or a specific sector or industry. Some of the factors that influence market trends include economic data, consumer sentiment, political events, global developments, and technological innovations.
3. Future prospects: This refers to the expected performance and outlook of a company based on its competitive advantage, growth strategy, innovation capability, and market opportunities. Some of the sources of information for future prospects include company reports, analyst ratings, industry reports, and news articles.

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Impact of the proposed tax proposals on the NSE and its listed companies

The Tax Laws (Amendment) Act, 2020 introduced some changes that affect the NSE and its listed companies. Some of these changes include:

1. Scrapping of preferential tax treatment for new issuers: The Treasury scrapped the preferential tax treatment of between 20% to 27.5% that was enjoyed by new issuers for up to five years depending on how much stake they offered to the public. The tax was then set at a flat rate of 25%, lowering the incentive for a company to offer a higher stake to the public when joining the NSE.
2. Introduction of VAT on brokerage services: The Treasury also introduced a 14% VAT on brokerage services revenue. Stockbrokers warned that this will make investing in shares and bonds expensive as they will pass on the cost to investors. This may lead to reduced liquidity and activity in the stock market as investors search for other places to earn higher returns.
3. Removal of withholding tax on interest earned from infrastructure and green bonds: The Treasury had initially proposed to introduce a 10% withholding tax on interest earned from infrastructure and green bonds but this was dropped after lobbying from stakeholders. This is a positive development for investors who want to invest in these bonds that offer tax-free returns4.

The NSE is a vibrant and dynamic market that offers investors a variety of opportunities to invest in different sectors and diversify their portfolios. The NSE offers a range of products and services, such as equities, derivatives, debt, exchange-traded funds, index funds, mutual funds, and corporate bonds. The NSE also provides a platform for raising capital, enhancing corporate governance, promoting financial inclusion, and supporting economic development.

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However, investors should also be aware of the risks and challenges that the NSE faces, such as market volatility, regulatory changes, competition from other exchanges, and technological disruptions. The NSE is constantly innovating and adapting to meet the changing needs and expectations of its stakeholders. The NSE is also expanding its global presence and partnerships to increase its visibility and influence.

The NSE is not just a stock exchange, but an investment hub and the heartbeat of the economy. It reflects the aspirations and potential of a nation that is on the rise. By investing in the NSE, investors can be part of this exciting journey and contribute to the financial well-being of themselves and others.