NSE investors trade cautiously with eye on company earnings

Investment brokers on the trading floor of the Nairobi Securities Exchange. PHOTO | SALATON NJAU | NATION MEDIA GROUP 

By CHARLES MWANIKI, cmwaniki@ke.nationmedia.com

In Summary

• The Nairobi Securities Exchange (NSE) has been oscillating within a tight range since the beginning of the year as nervous investors trade cautiously with a keen eye on company earnings and developments in the political scene.
• NSE 20 share index has held between 3750 and 4000 points through the first two months, with the market unable to sustain either a rally or price decline beyond a few sessions at a time.
• There has been limited corporate activity in the period, meaning that there has been little to excite investors in the market and fuel a share price rally or fall.

The Nairobi Securities Exchange (NSE) has been oscillating within a tight range since ...
the beginning of the year as nervous investors trade cautiously with a keen eye on company earnings and developments in the political scene.

The NSE 20 share index has held between 3750 and 4000 points through the first two months, with the market unable to sustain either a rally or price decline beyond a few sessions at a time.

Market capitalisation has moved up and down between Sh1.92 and Sh2 trillion since the beginning of January, only this week returning to the Sh2 trillion level for the first time since mid-January.

There has been limited corporate activity in the period, meaning that there has been little to excite investors in the market and fuel a share price rally or fall.

“Investors have generally been approaching the market with a certain amount of caution, taking into account that there was a number of profit warnings for 2015 earnings. Foreign investor caution is due to the heightened political activity,” said Sterling Capital analyst Eric Munywoki.

The market’s movement has largely been driven by the Safaricom share, and to a lesser extent those of EABL and Equity Bank.

Safaricom’s decline to Sh15.10 in the third week of January coincided with the NSE 20 share index‘s fall to its lowest point this year at 3745 points.

The counter has since then recorded a gain of 6.6 per cent to Sh16.20—representing a market cap gain of Sh45 billion— with the index in turn recovering to the current 3862 points. The telco is one of the few stocks that have been able to consistently weather the bearish run in the market over the past one year.
Year to date, the index is down 4.4 per cent.

READ: NSE investors hope for a turnaround after bear run

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“In terms of daily volumes, Safaricom is the most liquid stock. Foreign investors are opting for it since they prefer stocks that not only offer volume, but also ease of entry and exit,” said Mr Munywoki.

Data compiled by Standard Investment Bank shows that 80 per cent of the counter’s traded turnover of Sh2 billion was on foreign investor trading.

The bourse’s market turnover fell to Sh10.1 billion in February from Sh12.95 billion in January as a result of the cautious trading among investors.

Analysts expect however that with the commencement of the results announcement season, some shares might rally in the coming weeks thus boosting the market.

Banks are expected to put out the bulk of the results announcements in the coming weeks.