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.
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.
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