Kenyan Equities Market anticipate release of FY18 results

Kenya’s 2 and 15-year Treasury Bonds Raise Ksh 32bn

The Kenyan equities market closed negatively the week ending February 21 especially the NSE (Nairobi Securities Exchange) 20 share index driven by declines in large-cap stocks.

“The main Kenyan indices closed their eighth session of the year in the red zone w/w on the back of increased trading across both the foreign and the local investors,” according to the Genghis Weekly Strategy.

The NASI, NSE 25 and the NSE 20 share indices declined by 2.5%, 3.3% and 1.7%, respectively, during the week.

The top traded counters in the week collectively accounted for 84.4% of the week’s total turnover. Foreign investors averaged 61.4% of total activity recording net inflows of Ksh 568.0 million.

East Africa Breweries Limited (EABL), Co-operative Bank, British American Tobacco (BAT) and Equity Group, stocks declined by 9.8%, 6.1%, 4.7% and 2.7%, respectively.

Despite the market trading at valuations below the historical average, Cytonn Investments is of the view “There is value in the market.”

The market is currently trading at a price to earnings ratio (P/E) of 12.4x, 7.4% below the historical average of 13.4x, and a dividend yield of 4.7%, above the historical average of 3.8%.

“The current P/E valuation of 12.4x is 26.4% above the most recent trough valuation of 9.8x experienced in the first week of February 2017, and 49.1% above the previous trough valuation of 8.3x experienced in December 2011,” says Cytonn Investments.

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Going forward, Genghis says activity in the coming weeks will increase as investors anticipate the release of FY18 results for most companies, while activity remains inclined towards the index counters.

For Cytonn Investments, there would be a possibility of “Increased inflows from foreign investors, as they take advantage of the attractive valuations, to support the positive performance.”

NASI, NSE 20 and NSE 25 year-to-date (YTD) gains are 9.8%, 5.1% and 9.6%, respectively.

Global Trends

Global equity markets edged up slightly on increased investor optimism, following progress in the discussions outlining the broad commitments needed to resolve the trade dispute between China and the US.

However, the uncertainty surrounding Brexit and the likelihood of a no deal Brexit remained during the week, as the UK Government failed to garner enough support for the amended Brexit deal.

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Last paragraphs courtesy of the CBK Weekly Report