NSE 20 index falls as investors cash in on share prices surge

Nairobi Securities Exchange trading floor.  Nation Media Group

By CHARLES MWANIKI

In Summary

• The Nairobi Securities Exchange (NSE) Thursday dropped 43.96 points to close the day at 4975.77 points.
• On Wednesday, the market had dropped 11.18 points to stand at 5019.73 points following what analysts said was profit taking by investors.
• Investor wealth went down by Sh13 billion as market capitalisation came down to Sh1.634 trillion, down from Sh1.647 trillion.

The NSE 20 share index Thursday slipped below the 5000 barrier on profit taking even as the shilling rose to its highest level against the dollar since last September.

The Nairobi Securities Exchange (NSE) dropped 43.96 points to close the day at 4975.77 points, its second straight day of loss after it hit a four-and-a-half-year high of 5030.91 points on resumption of trading on Tuesday, following the Easter weekend and the Supreme Court judgment on the presidential petition.

On Wednesday, the market had dropped 11.18 points to stand at 5019.73 points following what analysts said was profit taking by investors keen to cash in on the surge in prices witnessed on Tuesday. Equity turnover Thursday dropped from the Sh577 billion registered on Wednesday to Sh439.9 billion, while shares traded reduced from 27.02 million to 23.18 million.

Investor wealth went down by Sh13 billion as market capitalisation came down to Sh1.634 trillion, down from Sh1.647 trillion.

“We have seen a bit of market correction coupled with some profit taking again today. The expectations surrounding the announcement of banks’ first quarter results which are coming up will also be a factor in the market going forward,” said Kuria Kamau, an analyst at Kestrel Capital.

He added that there was cause for optimism, however, in the market with foreign investors continuing to show keen interest in the major counters.

There was heavy foreign investor buyer interest in BAT Kenya and Safaricom, which saw the share price of Safaricom appreciate for a second straight day to close at Sh6.30, up from Sh6.15.
According to Mr Kamau, BAT saw heavy selling from local investors as it remained solid at Sh540 per share.

Other heavily traded counters were KCB, Equity Bank and East African Breweries Limited.

In the currency market, the Central Bank of Kenya (CBK) quoted the shilling at a mean rate of 84.85 units to the dollar Thursday, meaning it has appreciated against the dollar by 78 cents from last Thursday. This is the highest level the shilling has reached against the greenback since it was quoted by CBK at a mean of 84.84 on September 25.

The local unit had closed Wednesday at a mean of 84.99 to the dollar in the CBK rates, while banks quoted it at 84.80/85.00 at the close of trading.

For banks, the shilling opened trading yesterday at 84.55/95 as demand for dollars from investors cooled off in the early part of the month, before settling at 84.75/85 on a quiet trading day.

“The Kenya shilling firmed lifted by dollar inflows into the local fixed income and stock markets. We expect the shilling to continue strengthening on slowing demand from corporates,” said ABC Bank in a morning note to clients.

Analysts from Commercial Bank of Africa, however, said that the shilling may come under mild pressure against the dollar next week if investors requiring dollars return to the market.

“The market has now entered a consolidation phase after the recent gains. We however expect market fundamentals to start dictating price action, and we might see it go back over the psychologically important 85 level again if the demand outweighs supply,” said Mr Joshua Anene, senior dealer at CBA.