Stock market investors get top earnings

A broker trades at the NSE. Total investor wealth at the bourse rose by Sh518.85 billion during the first three quarters of the year to stand at Sh1.79 trillion. FILE 

By David Herbling, hdavid@ke.nationmedia.com

In Summary

• NSE defied political uncertainty and election shocks to outdo Treasury bills, bonds, bank savings, property market and forex trading in the first nine months of the year.
• Total investor wealth at the bourse rose by Sh518.85 billion during the period to stand at Sh1.79 trillion.
• That performance pushed the NSE 20-Share Index up to 4,793.20 points as at the end of September

Share prices outperformed all other asset classes in the first nine months of the year, putting investors at the Nairobi bourse ahead their peers, the latest market data shows.

The Nairobi Securities Exchange (NSE) defied political uncertainty and election shocks to outdo Treasury bills, bonds, bank savings, property market and forex trading during the period.

Total investor wealth at the bourse – as measured by market valuation of all listed companies - rose by Sh518.85 billion during the first three quarters of the year to stand at Sh1.79 trillion.

That performance pushed the NSE 20-Share Index, which tracks changes in prices of a select group of 20 listed firms, up to 4,793.20 points as at the end of September – a 15.97 per cent increase from the year’s opening mark of 4,133.02 points.

This means that an investor who bought stocks at the Nairobi bourse in January had his portfolio increase by at least 16 per cent by the end of September.

That outcome put stock traders way ahead of the bonds market investors who have barely managed to get double-digit rate of returns. 

The FTSE NSE Bond Index, which tracks the returns of government securities, closed September at 92.31 points or 0.438 points lower than January’s opening of 92.748 points.

This is the most accurate measure of returns on fixed income securities taking into account the multiple variables that go into analysing bonds such as maturity, redemption features, credit quality, interest rate, price, yield and tax status.

(READ: Investor wealth at NSE hits record Sh1.8trn after technical hitch)

Earnings from Treasury bills and bank deposits dropped sharply during the year, keeping the investors down the pecking order. Last week, for instance, the Central Bank of Kenya received bids worth Sh2.07 billion for its 182-day Treasury bills and Sh1.16 billion for 364-day T-Bills at a weighted average rate of 9.6 per cent and 10.3 per cent respectively.

“Rising inflation means interest rates are likely to go up, negatively affecting yields on Treasury bonds and bills for current holders,” said Dennis Maranga, an investment analyst at Alpha Africa Asset Managers.

Bank deposits have become less attractive for investors given the current low interest rate regime that has seen lenders offer between six and seven per cent for fixed term deposits compared to 11 per cent last year.

The real estate sector has posted slower growth in the first half of the year, having taken a hit from election-related political uncertainty in the first quarter of the year.

HassConsult, a real estate manager that runs Kenya’s premier property index, reported in its half-year index that property prices rose 2.3 per cent in the second quarter of the year and by 9.9 per cent in the past 12 months, placing it way below the stock market performance.

Analysts expect the real estate sector to come under increased pressure following the enactment of a new law that introduces consumption tax on sale of commercial property such as office buildings, industrial premises, retail outlets, hotels and exhibition space.