Nairobi Securities Exchange on slow run as investors sell stocks

Thursday, December 5th, 2019 00:00 |
Nairobi Securities Exchange. Photo/Courtesy

John Otini

Profit taking by foreign investors and speculators has weighed down the Nairobi Securities Exchange (NSE) ahead of the holidays even as the NSE remained the top performer in sub-Saharan Africa (SSA).

Traders said there are more activities on the sale side with fewer buyers who are bargain-hunting for oversold counters.

The selling was triggered by profit taking on KCB Group, East Africa Breweries Ltd (EABL) and British American Tobacco (BAT) while net buying is on Safaricom and Equity Group.

“We expect the market to be subdued starting this December holiday right to January and so short-term investors and speculators are getting out early,” said Michael Mwakio, an analyst at Suntra Investment Bank.

Activities in the market have slowed down with turnover falling from Sh44.6 billion in the first quarter to Sh29.5 billion in the third quarter.

“We expect more selling as investors seek to prepare and set aside money for new year obligations such as school fees and others,” said Mwakio.

Big counters

Trading activity has largely been seen on big counters such as Safaricom, Equity Group, KCB Group, BAT Kenya and EABL. 

Foreign investors have been accounting for between 66 and 77 per cent of trading from last week.

The banking sector, Safaricom and EABL stock have helped to lift the market which has been reeling from the effects of a cash crunch and interest rate cap.

The sell off is also a readjustment after the bull run on the banking sector counters that emanated from the lifting of caps on the commercial bank interest rates. NCBA, Stanbic Holdings and Housing Finance were the main losers in the banking sector yesterday.

Kenya Airways, Longhorn Publishers, Nation Media Group and Scangroup were the worst performers in the commercial segment of the market.

There was little to no activities on the agricultural counters with most activities happening in the banking counters.

Capital outflows

However, Kenya has maintained the lead as the top gainer across SSA markets despite increased selling ahead of the holidays with Uganda, Egypt and Rwanda the only other gainers, while the rest of the markets are recording negatives.

October and November posted net capital outflows but the selling slowed down in November helped by attractive banking sector stocks.

Foreign investors pulled out Sh700 million in November, Standard Investment Bank said in a note to clients. They had sold Sh1.2 billion in October. 

The NSE all share index and NSE 20 share index are also losing.

Traders said that small investors tend to sell off their portfolios en masse to meet their immediate needs and for the holiday festivities.

However,, the NASI 25 Share index has moved up in the last three months helped by strong results from Safaricom and EABL with the repeal of the cap on interest rates pushing banking sector stocks up.

Analysts expect Safaricom and banks to continue being key counters of interest in the coming months.

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