High volumes and prices raise value of NSE shares

Markets await Eurobond issuance details, Central Bank of Kenya projects fall in cost of borrowing as appetite for domestic debt wanes. TEA Graphic  Nation Media Group

By DAVID MUGWE Special Correspondent

In Summary

• Investors transacted shares worth Ksh43.77 billion ($506.18 million) for the period ended March 2014.
• Analysts expect the market to be driven by macroeconomic factors such as inflation and interest rates.

The value of shares traded in the first three months of this year at the Nairobi Securities Exchange (NSE) hit a six-year high, driven by high volumes and increased prices.

Fresh data on the bourse’s activity for the first quarter shows that investors transacted shares worth Ksh43.77 billion ($506.18 million) for the period ended March 2014.

This was a 27.42 per cent increase over the shares valued at Ksh34.34 billion ($400.99 million) traded over the period ending March 2013, and more than three times the Ksh13.42 billion ($161.61 million) traded in the first three months of 2012.

In the first quarter of 2010 and 2009, shares worth Ksh18.89 billion ($244.38 million) and Ksh6.68 billion ($83.1 million) were transacted.

Data from the NSE shows that share prices at the Nairobi bourse rose as listed companies reported their performance for the period ended December last year and market capitalisation, which measures the value of all the shares in the market, rose marginally by 4.07 per cent to Ksh1.99 trillion ($23.12 billion).

A report by Africa Alliance shows that the NSE All Share Index grew by seven per cent in the year ending December 2013, second only to the Egypt Stock Exchange’s EGX 100 Index, which gained 22 per cent.

The Africa Alliance data shows that Kenya was ahead of the stock exchanges of Nigeria, Morocco, Tunisia and Zimbabwe.

Tunisia’s TUNIS Index was up 5.5 per cent over the period, while Morocco’s All Share Index (Casablanca MORALSI) was up 5.4 per cent. Nigeria’s All Share Index shed 10 per cent this year, with Zimbabwe’s industrial (All Share) index down nine per cent.

Going forward, analysts expect the market to be driven by macroeconomic factors such as inflation and interest rates, which guide investors on where they can earn good returns at reduced risk.

“For Kenya, the Eurobond will play a key role, especially on the fixed income side as it will act as a benchmark not only for foreign denominated debt but local debt too, to some extent,” said Vimal Parmar, head of research for sub-Saharan Africa at Nairobi-based Burbidge Capital.

READ: First $2bn Eurobond set to push down lending rates

He said that global factors such as the reduced stimulus by the United States Federal Reserve will continue to also affect local markets, especially as yields go up, causing a shift in portfolio allocations back to developed markets.

“However, local activities in investments, political stability and expected good domestic product growth rates for 2014 are also other factors that will affect the regional markets,” said Mr Parmar.

A similar upsurge in activity was posted in other regional bourses. The Rwanda Stock Exchange (RSE) Local Share Index, which tracks the bourse’s two local stocks, closed at 262.53 points in the first quarter, which is 12.95 per cent higher than its closing level of 232.42 at the end of 2013.

READ: Batu, Bank of Kigali are top gainers in first quarter of 2014

At the Dar es Salaam Securities Exchange, CRDB and NMB banks’ counters have helped push up both the DSE Index and the Tanzania All Share Index (TSI). The DSEI averaged 1,977.61 points while TSI edged north at 2,949.37 points — the highest this year.

The most heavily traded counters on the NSE in the first quarter of this year were Safaricom, KCB, East African Breweries Ltd and Equity Bank, which are also popular with foreign investors.

They made purchases worth Ksh21.31 billion ($247 million) and sales worth Ksh24.09 billion ($279 million) making them net sellers over a similar period since March 2010.

Foreign investors who transacted about half of the value of the shares traded, pulled out Ksh2.78 billion ($32.16 million) mainly from counters such as Uchumi Supermarkets whose stock was the second worst performer in the region.

Additional reporting by Martin Luther Oketch