Bank, insurance stocks slow down in first quarter

Money Markets

1. 

Brokers trade on the floor of the Nairobi Securities Exchange. Key sectors at the NSE including banking and insurance comparably slowed down in the first quarter of the year, with analysts saying declining attraction is depressing share prices. PHOTO | FILE 

By CHARLES MWANIKI, cmwaniki@ke.nationmedia.com

In Summary

• During the quarter, insurance stocks have gained 11 per cent compared to 34 per cent in the corresponding quarter of 2014 and 63.2 per cent for the whole of 2014 when the segment was the star performer at the bourse.
• The banking segment is up 2.2 per cent this year, compared to a full-year 2014 gain of 20 per cent and a four per cent gain in the first quarter of last year.
• Analysts at Stratlink Africa say financial sector stocks still provide the safest bet of a continuation of the market’s Bull Run owing to the good financial performance of the various companies at a time their peers across other segments are reporting depressed earnings.

Key sectors at the Nairobi Securities Exchange (NSE) including banking and insurance comparably slowed down in the first quarter of the year, with analysts saying declining attraction is depressing share prices.

During the quarter, insurance stocks have gained 11 per cent compared to 34 per cent in the corresponding quarter of 2014 and 63.2 per cent for the whole of 2014 when the segment was the star performer at the bourse.

The banking segment is up 2.2 per cent this year, compared to a full-year 2014 gain of 20 per cent and a four per cent gain in the first quarter of last year.

The manufacturing segment is flat so far, with a gain of only 0.1 per cent. The segment had opened 2014 on a slower note by falling 7.2 per cent in quarter one, but regained its momentum to end the year 12.4 per cent higher compared to 2013.

Safaricom’s year-to-date gain of 18 per cent—translating to a Sh102 billion value gain to Sh665 billion— has accounted for the bulk of total NSE market cap gain of Sh120 billion to Sh2.42 trillion.

“The basis of pricing of shares is demand and supply. We have seen foreigners exiting the market this year and therefore the demand that had been high in the past and driven share prices is simply not there,” said ABC Capital corporate finance manager Johnson Nderi.

ALSO READ: Safaricom sheds Sh28bn as foreign investors sell for profit

In the first quarter, foreign investors drew out of the market a net of Sh3.16 billion, which was to a large extent due to profit taking.

In terms of capitalisation gain, the banking segment is up Sh19 billion to Sh875 billion, compared to a gain of Sh28 billion in quarter one 2014 and Sh141 billion gain for the full year 2014.

Insurance counters collectively gained Sh56 billion in 2014, half of the gains recorded in the first quarter. The segment has registered a gain of Sh14 billion so far year.

Agriculture, energy and construction sector stocks have however shown improvement in the first quarter of 2015 compared to 2014, registering gains of 20.7 per cent, 4.2 per cent and 4.3 per cent respectively.

Last year the agriculture stocks were collectively up by 15 per cent, energy down 2.9 per cent while construction was down 2.2 per cent.

Some analysts have pointed out key counters in the banking segment which have enjoyed a good run have nearly achieved their optimum valuations at the bourse based on their underlying fundamentals.

In an analysis released in November last year covering the three largest indigenous Kenyan banks (Equity, KCB and Co-operative), Citi’s global investment banking arm said the banks have little room for improvement because they have already shown good balance sheet utilisation.

Analysts at Stratlink Africa say however that these financial sector stocks still provide the safest bet of a continuation of the market’s Bull Run owing to the good financial performance of the various companies at a time their peers across other segments are reporting depressed earnings.