NSE’s foreign investors shrug off Hague effect

Stockbrokers at the NSE trading floor. Foreign participation at the bourse last week stood at 55 per cent, Monday saw it rise to 72 per cent. Photo/FILE  NATION MEDIA GROUP

By CHARLES MWANIKI

Posted  Wednesday, September 18  2013 at  19:05

In Summary

• Major cap counters at the bourse have continued their good performance despite the risks, some having closed their books for dividend payment.
• Observers attribute the performance of the bourse to investors’ anticipation of the risks, hence minimising the shock value which could have negatively affected the share prices.

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Strong foreign demand at the Nairobi Securities Exchange (NSE) has helped the bourse weather the political risk associated with the International Criminal Court (ICC) trials and effects of VAT law, analysts say.

Major cap counters at the bourse have continued their good performance despite the risks, some having closed their books for dividend payment.

Observers attribute the performance of the bourse to investors’ anticipation of the risks, hence minimising the shock value which could have negatively affected the share prices.

Foreign participation at the bourse last week stood at 55 per cent, while this Monday saw it at 72 per cent and 60 per cent on Tuesday.

“The market understood very well the shocks were coming, hence they have had no surprise. The long-term prospects are seen as good and a lot of the foreign interest is from long-term investors,” said Suntra Investment head of research Johnson Nderi. “They have sought to take positions on the stocks early. For them the valuations make sense.”

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Kestrel Capital markets analyst Kuria Kamau said the market has been largely driven by foreign demand, with investors keen to take advantage of lower valuations on major counters, especially East Africa Breweries Ltd.

Some market analysts had expressed concern foreign activity at the bourse might slow down in September due to political risk and the inflationary effects of the VAT Act.

Risk and research firm Stratlink Kenya had said in its September equities market outlook the risks would be a threat to the market even as investors seek value stocks which are likely to generate returns in the short-term, especially in the commercial sector.

“In the coming month, political intrigues around the devolution question and the planned Hague trials are likely to inform trading themes going forward… as such, we are likely to see a slowdown in foreign activity momentum as foreign participants evaluate their exposure to the NSE,” said Stratlink in a September review.

The big cap counters of Safaricom, EABL, Kenya Commercial Bank and Equity Bank have particularly seen heavy foreign demand in the past one week, keeping the prices aloft.

Highest closing price

Safaricom once again touched its all-time high price of Sh8.30 on Tuesday and reached its highest closing price of Sh8.20 yesterday.

KCB’s shares have traded near historical highs of Sh46, while EABL has stabilised at Sh300 ahead of its September 30 register closure for a Sh4 per share dividend.

“The equities market rebound is driven by gains made on some large caps counters. EABL (up 0.3 per cent), Safaricom (up 0.6 per cent), KCB (up 1.1 per cent) and Equity Bank (up 0.8 per cent) all registered gains, on the back of strong foreign investor demand,” said Standard Investment Bank in a note to clients on Tuesday.