Investors Hopeful as Equities Sustain an Upward Trend

During the week, the equities market was on an upward trend, with NSE 25, NASI and NSE 20 gaining 2.6 percent, 2.3 percent, and 0.8 percent respectively.

This took the YTD performance of equities to 5.2 percent, 5.1 percent and 0.7 percent for NASI, NSE 25 and NSE 20, respectively.

For the last twelve months, NASI, NSE 25 and NSE 20 have gained 45.1, 39.1 and 27.8 percent respectively.

Last week’s performance was driven by gains in large-cap stocks such as Barclays Bank of Kenya, Equity Group and Safaricom Ltd, which gained 10.8, 6.0 and 4.4 percent respectively.

Since the February 2015 peak, the market has gained 1.5 percent for NASI and lost 32.0 percent for NSE 20.

Equities turnover increased by 149.7 percent to USD 78.9 million from USD 31.6 million the previous week.

Foreign investors turned net buyers with a net inflow of USD 1.9 million compared to a net outflow of USD 1.8 million recorded the previous week.

The market is currently trading at a price to earnings ratio (P/E) of 13.8x, which is 2.9 percent above the historical average of 13.4x, and a dividend yield of 3.7 percent same as the historical average of 3.7 percent.

The current P/E valuation of 13.8x is 42.3 percent above the most recent trough valuation of 9.7x experienced in the first week of February 2017, and 66.3 percent above the previous trough valuation of 8.3x experienced in December 2011.

According to Cytonn Investments, there are still pockets of value in the market, with the current P/E valuation being 22.5 percent below the most recent peak of 16.9x in February 2015.