NSE lags African peers on pandemic impact

Nairobi Securities Exchange trading floor. FILE PHOTO | NMG 

By CHARLES MWANIKI
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Summary

• Genghis Capital report shows the NSE All-Share Index return of -15.4 per cent trails those of fellow East African stock markets of Uganda (-4.9 per cent), Tanzania (-12.4 per cent) and Rwanda (10.8 per cent). It also trails large exchanges in South Africa (-4.2 per cent) and Nigeria (-6.8 per cent).
• Of the large exchanges in Africa, only Egypt at -23.9 per cent and Morocco at -16.6 per cent trail the NSE All-Share Index in year-to-date performance.
• The Covid-19 outbreak has also had a big effect on the market, affecting companies’ financial performance and subsequently that of shares at the bourse.

The Nairobi Securities Exchange (NSE) lags regional peers in local currency returns this year, even as the majority of African bourses remain in the red after foreign investor flight to safety on the outbreak of Covid-19.

Analysis on performance of a select number of African stock exchanges done by Genghis Capital shows the NSE All-Share Index return of -15.4 per cent trails those of fellow East African stock markets of Uganda (-4.9 per cent), Tanzania (-12.4 per cent) and Rwanda (10.8 per cent). It also trails large exchanges in South Africa (-4.2 per cent) and Nigeria (-6.8 per cent).

Of the large exchanges in Africa, only Egypt at -23.9 per cent and Morocco at -16.6 per cent trail the NSE All-Share Index in year-to-date performance.

The declines seen across the continent’s bourses are partly attributable to the outflow of investor dollars from equities, going to other asset classes and also to the safety of developed markets.

In Kenya, the NSE indices have largely been driven by foreign investor activity, centred on the large-cap blue chips such as Safaricom

, EABL , Equity Bank and KCB Group

, which have the necessary liquidity and underlying fundamentals to support large ticket trades.

The Covid-19 outbreak has also had a big effect on the market, affecting companies’ financial performance and subsequently that of shares at the bourse.

Thousands of potential investors have also lost jobs due to the economic restrictions brought by the pandemic, thus affecting the level of local investor participation in the market.

The NSE All-Share Index opened the year at 166.4 points, having made a gain of 18.5 per cent in 2019 as the market finally showed signs of shaking off a prolonged bearish run.

It, however, tapered down in January and February as concerns about the global spread of the coronavirus grew stronger, culminating in a sharp drop to 124.3 points two weeks after the announcement of Kenya’s first Covid-19 case.

There has been a recovery, however, since the end of March, with the index now at 140.7 points, led by the same large-cap counters that were largely responsible for the drop in the first half of March.