Bourse cools off as dividend season closes

A Nairobi Securities Exchange worker on the trading floor. The bourse has seen sell-offs on profit taking. FILE 

By John Gachiri, jgachiri@ke.nationmedia.com

In Summary

• Some observers cite the role of terrorism in the recent sell-offs by foreigners.

The Nairobi Securities Exchange (NSE) has gradually lost steam as investors take profit and cash in on gains made from the ending dividend season amidst terror attacks.

 

The NSE-20 Share Index dipped in seven consecutive trading sessions starting Monday May 12, 2014 to Wednesday May 21 only regaining some ground towards the end of last week.

Market players said the bourse was, looked overall, still holding its ground as seen by the market capitalisation and the NSE-20 Share Index oscillating at the 4,900 point mark.

The NSE-20 Share Index closed at 4,925.58 points up from 4,910.74 points it begun the year with. Market capitalisation stood at Sh2.09 trillion up from Sh1.92 trillion over the same period.

Some are seeing the role of terrorism in the recent sell-offs and dip especially by foreigners though others say the two are unrelated.

“The recent spike in frequency and intensity of attacks has given the bulls a pause,” analyst Aly-Khan Satchu told news channel Bloomberg citing CIC Insurance, Co-op Bank, Pan Africa Insurance Holdings and Equity Bank as badly hit by the sell off.

Going forward there are mixed forecasts on how the market will behave in the coming weeks as quarter one results and register closures on some counters conclude.

“I think we have entered into a period where the market is at a range with no clear direction of the trend. I still think the sell-off will sustain albeit on a lower velocity than has occurred this week,” said Moses Waireri, head of research at Sterling Capital.

He said there might be renewed interest on Safaricom and Equity Bank due to the ongoing European roadshow by the telecommunications firm and Monday’s announcement on what the bank plans to do with its mobile virtual network operator license.

Other analysts expect activity to pick up following confirmation by the Treasury that it will issue the Sh132 Eurobond in June.

“Recovery is expected as resolutions on the Eurobond have been achieved, prompting the Kenyan government to announce that the sale of the $1.5 billion Eurobonds is underway, with the proceeds expected to counter the challenge of crumbling infrastructure which is hampering growth,” said a market report by Genghis Capital.

If that happens this could change the situation for select blue chips that have lost value as investors cashed in on dividends and capital gains. But this could be balanced out by a series of rights issues that may see some share prices fall.

National Bank, CIC Insurance, DTB and Uchumi are set for rights issues this year.

CIC Insurance share has risen by 72 per cent since the beginning of the year but Friday’s rights issue announcement should put a break to the share price rally.

“From this, we see a deeply discounted offer (or a sizeable capital increase). The price of the insurer has rallied significantly in the last four months- up 72 per cent,” said a market report by Standard Investment Bank.