Investor exits wipe out Sh42bn off NSE bank stocks

Money Markets

An investor at the Nairobi Securities Exchange (NSE). PHOTO | FILE 

By GEORGE NGIGI, gngigi@ke.nationmedia.com

In Summary

• Foreign investors have been rebalancing their portfolio with the recent exits from Kenya and a return to Nigeria, which recently concluded a peaceful election.

Listed banks lost Sh42 billion in the first six months of the year as heightened foreign investor exits slowed down activity at the Nairobi Securities Exchange (NSE), depressing share prices.

Co-operative Bank was the only lender whose market value increased nine per cent, leaving 10 listed rivals on a losing streak that defied strong financial results.

Mortgage lender Housing Finance recorded the biggest share price erosion of 39 per cent, followed by CfC Stanbic and National Bank which both lost 14 per cent.

Kenya’s largest lender by customer base Equity Bank whose share price shed only nine per cent was, however, the biggest loser in absolute terms having shed Sh16 billion in six months.

“Banking stocks had hit their fair value with investors moving to mid and small caps where opportunity still exists,” said Mercyline Gatebi, a research analyst at Genghis Capital.

Ms Gatebi said foreign investors have been rebalancing their portfolio with the recent exits from Kenya and a return to Nigeria, which recently concluded a peaceful election.

Investor wealth at the NSE has shrunk by Sh27 billion since January – a period that also saw small counters outperform blue chip companies signalling a difficult year for equity investors.

Market capitalisation (the market’s valuation of all listed firms) stood at Sh2.27 trillion at the end of last week compared to Sh2.3 trillion on the first day of the year.

“It is shaping up to be a disappointing year, partly due to modest earnings and market conditions,” said Eric Musau of Standard Investment Bank.

Mr Musau said the earnings posted so far had not been exceptional while the confusion surrounding the introduction of capital gains tax at the beginning of the year forced many investors to take a wait-and-see attitude.

The National Treasury has since scrapped the capital tax on traded shares and instead introduced a transaction-based levy of 0.3 per cent but Mr Musau reckons that this concession will offer only partial relief.

“This will not entirely lift the market because it still makes the Kenyan market expensive compared to most of its peers,” he said.

READ: Treasury scraps controversial 5pc capital gains tax after rejection

The indicative NSE 20 share index lost 6.2 per cent in the first six months of the year falling below 5,000 points.

Analysts at Genghis Capital do not expect the index, currently at 4,793 points, to hit the 5,000 mark before end of year.