NSE hits ceiling below Sh2trn with focus on Safaricom stock

A broker trades at the NSE. The bourse closed the week at 5,018 points. FILE 

By CHARLES MWANIKI, cmwaniki@ke.nationmedia.com

In Summary

• The NSE 20-Share Index was unable to break past the 5,100 points range last week due to profit taking and reduced foreign investor participation.
• The bourse closed the week at 5,018 points, down from last Fridays 5,059 points, with market capitalisation also reducing slightly to Sh1.983 trillion from the previous week’s Sh1.988 trillion.
• However, analysts expect the bourse to gain from investor dollars coming in for Treasury bond issues.

The stock market appears to have hit the ceiling just before crossing the Sh2 trillion total valuation mark, with telecommunication firm Safaricom’s stock tipped to determine the direction that the bourse takes in the coming weeks.

The NSE 20-Share Index, which tracks performance of a select group of listed companies, was unable to break past the 5,100 points range last week due to profit taking and reduced foreign investor participation, though analysts expect the bourse to gain from investor dollars coming in for Treasury bond issues.

The bourse closed the week at 5,018 points, down from last Fridays 5,059 points, with market capitalisation also reducing slightly to Sh1.983 trillion from the previous week’s Sh1.988 trillion.

The NSE 20-Share index hit a five-year high in November at 5,137 points, and analysts see the 5,100 points level as a key resistance point for the bourse this quarter.

“The index was weighed down by the deficiency of foreign participation as well as profit taking on heavily traded large cap counters such as Safaricom,” said Genghis capital in a research note released on Friday.

The market has also been unable to break into the Sh2 trillion capitalisation mark, coinciding with the bourse’s biggest company Safaricom’s failure to hit the Sh12 mark per share.

READ: NSE value nears Sh2trn after Safaricom surges to new high

The NSE 20-Share Index has however consolidated above 5,000 points since breaking above the key mark on January 8.

ABC Capital manager for corporate finance and advisory Johnson Nderi said the apparent ceiling could be a pause in the market’s upward trend to allow for corrections, saying that markets are rarely marked by straight line gains.

He sees the bourse as a likely beneficiary of increased local and foreign investor funds in the coming months following the government’s Eurobond issue, slated for later this month or early February.

According to Mr Nderi, a successful Eurobond issue is likely to reduce governments borrowing appetite in the coming months, resulting in a downward trend for interest rates.

Lower interest rates would allow investors to borrow more to invest in equities, raising demand and prices of shares.

“Some of the Sh15-20 billion that goes into long term government debt per month from institutions such as fund and unit trust managers could find its way into the equities market. We are seeing people taking position in the market today so that they can lock in the lower prices anticipating a rise in demand for shares,” said Mr Nderi.

In the past week, Safaricom lost 2.1 per cent to close at Sh11.50, from 11.75 the previous Friday.

Other big cap companies also returned negative numbers during the week, with EABL closing 3.3 per cent down for the week at Sh289, KCB down 3.7 per cent at Sh45.75 and Equity Bank down three per cent at Sh32.25.