Nairobi Indices Slip For the Second Week; CMA Release Q4’2019 Bulletin

Nairobi Securities Market’s Momentum Still Negative, Its 3rd Week

Image I Courtesy NSE

Key indices at the Nairobi Securities Exchange traded lower for the second subsequent week with the NASI, NSE-20 and NSE-25 retreating 0.8%, 1.0% and 0.7% respectively week on week.

Turnover fell 30.2% during the week to Ksh 2.8Billion compared to a turnover of Ksh 4.1 Billion in the prior week.

The performance in NASI was driven by losses recorded by large-cap stocks such as Bamburi, Barclays and Co-operative Bank (8.4%), (3.0%) and (2.5%), respectively.

Foreign investors accounted for 63.2% of the week’s total activity compared to 58.5% in the previous week.

Foreign investors were net buyers for the fourth consecutive week, logging net inflows of Ksh 165.9 Million compared to inflows of Ksh 667.0 Million in the previous week.

Net buying activity was largely on Equity Group and EABL while net selling was on Safaricom, KCB Group and Centum Investments.

During the week, Jubilee Holdings announced plans to lay off 52 employees as it completes splitting of its insurance business. 

The insurer’s move aims to increase efficiency and management focus and to comply with the revised 2010 Insurance Act, cap 487, which requires all composite companies to have separate entities, by separating short-term underwriting business from the long-term underwriting business.

The separation has led to the creation of two new companies, Jubilee Health Insurance offering medical covers and Jubilee General Insurance offering general insurance covers.

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On the other hand, the Capital Markets Authority (CMA) released its Q4’2019 Statistical Bulletin, highlighting the performance of the Equities market during the quarter under review:

During the quarter, four companies remained suspended, namely Atlas African Industries Ltd, Deacons East Africa Plc, ARM Cement Plc, and Mumias Sugar Company Ltd.

There was increased trading at the bourse with equity turnover increasing by 27.0% to Kshs 45.0 bn in Q4’2019, from Kshs 35.4 bn in Q4’2018, attributable to the improved financial performance of listed commercial banks in the country, coupled with the repeal of the rate cap law in the last quarter of the year, which led to increased activity at the bourse.

In Q4’2019, the NASI and the NSE 20, stood at 166.4 and 2,654.4 points, respectively, recording gains/(losses) of 18.5% and (6.3%), respectively, from 140.4 and 2,833.8 points, respectively, recorded in the same period of review in 2018. The gain recorded by NASI is attributable to the rallying of banking stocks following the removal of the interest rate cap.

Foreign investor participation decreased by 12.1% points in Q4’2019 to 63.0%, from 75.1% in Q4’2018, attributable to investors shifting to developed markets following the announcement of the phase one U.S- China trade deal in the fourth quarter giving a boost to global equities.

The derivatives market recorded a 44.1% decrease in trading with 205 contracts traded in Q4’2019, from 367 contracts traded in Q3’2019. 

Safaricom was the most liquid counter with 133 contracts followed by banking contracts (Equity at 35 and KCB Group at 27). The NEXT derivatives market is expected to provide new opportunities to investors enabling them to diversify, manage risk, and allocate capital efficiently, however, it remains extremely small with little activity.

During the period under review, two medium-term notes and one corporate Infrastructure bond issued by Housing Finance, CIC Insurance, and Kengen, respectively, matured. 

Housing Finance issued a Kshs 3.0 billion medium-term note in October 2012 with a maturity date of October 2019. CIC’s medium-term note worth Kshs 5.0 bn, issued in September 2014, matured in October 2019. 

Kengen’s Infrastructure bond worth Kshs 14.1 bn was issued on November 2009 and matured in October 2019. 

The local corporate bond market has witnessed reduced activity, with the Acorn Green Bond being the only issued corporate bond in the last five years, attributable to defaults witnessed over the past five years by issuers such as ARM Cement, Nakumatt and Imperial Bank.

While general market performance was relatively subdued in the first three quarters of the year relative to the year 2018, performance in Q4.2019, especially for the equities, has been on a positive trajectory, surpassing performance in the corresponding quarter in 2018.

Source: Cytonn Investments and Genghis Capital