Trading by foreign investors was picking up at Kenya’s Nairobi Securities Exchange last month, just as the NSE20 index of blue chip prices retreated. A report by stockbroker AIB-AXYS Africa forecasts a strong last quarter: “Banking, manufacturing stocks and the NSE’s sole listed telco Safaricom are tipped to lead in market performance in the last quarter of the year as the effects of the easing of curfew restrictions filter through into the economy”.
During the first 3 weeks of October, foreign participation in the NSE trading was 64% of the total trading, up from 48.5% in August and 49.9% in September. The average was 64.7% in 2020.
In terms of value traded on the NSE, the Statistical Bulletin Q3 2021 from the regulator Capital Markets Authority (CMA) shows equities turnover in the quarter to September was KES 31.4bn ($282m), down 17% from KES 38bn in Q2. However, bond trading was KES 301.1bn ($2.7bn), up 11% from KES 271.2bn in Q2, and more than 99.9% of this activity was in Treasury Bonds while corporate bonds have traded KES 662m out of total bond market trading of KES 771.1bn for the 9 months to end September.
According to this report in Business Daily, Renaldo D’Souza, head of research at Sterling Capital says: “(global) investor concerns over inflation and the growing likelihood of an upward revision of the Fed rate and other benchmark interest rates resulted in flow of capital to frontier and emerging markets in October.”
The NSE 20 Index was down by 3.4% for October to 1961.33, although the Nairobi All Share Index was almost stable. The NSE 20 Index is far below its previous high (4,069.20 in August 2017) but this year it has gained 21.3% according to Bloomberg.
On 20 October, President Kenyatta lifted the night-time curfew to protect people from COVID-19 first imposed in March 2020. According to a news report on Reuters, he said infection rates are down with less than 5% of tests coming back are positive: “It is now time to shift our focus from survival to co-existing with the disease.” Only 4.5 million Kenyans have at least one vaccine shot, out of 54m, and the pandemic is linked to 5,233 deaths.
Broker Cytonn reported for October: “The equities market performance was driven by losses recorded by banking stocks such as NCBA, Co-operative Bank, KCB and Diamond Trust Bank (DTB-K), of 7.3%, 6.4%, 6.0% and 5.6%, respectively. The losses were however mitigated by gains recorded by Safaricom of 1.7%.”
Taking a longer view, AIB AXYS (part of Mauritius investment bank AXYS) reported: “Safaricom and large bank stocks have already been outperforming the market in the last year, backed by continuing demand from foreign investors who have been keen on their ability to retain value due to good profits and solid fundamentals. For the banks, strong profit growth in the first half of the year was a pointer to a return to health, and with it the promise of a resumption of dividend payouts”
“We expect increased interest in the banking stocks and Safaricom. The improving economic conditions will likely be reflected in the banks’ quarter three numbers as their loan books expand, asset quality improves, and provisions continue to decrease.”
“The further easing of restrictions, the continued vaccine roll-out and the increasing infrastructure spending by the government will buoy earnings in the manufacturing and construction sectors leading to better results for counters such as Bamburi and EABL.”