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Kenyan Stocks Bounce Back on Increased Local Buying

Foreign investors were bearish on Nairobi Securities Exchange (NSE) offloading their stakes on Safaricom and Equity Group, according to Genghis Capital.

Nairobi Securities Exchange

After a week that witnessed sell-off due to the uncertainty over the novel coronavirus,  the equities market at Nairobi Securities Exchange rebounded during the week.

The NASI, NSE-20 and NSE-25 rising 5.1%, 2.7% and 5.8%, respectively, week on week taking their YTD performance to losses of (6.2%), (9.6%), and (5.5%), for the NASI, NSE 20, and NSE 25, respectively.

Turnover rose 31.3% during the week to Ksh 3.8 billion comThe performance in NASI was driven by gains recorded by large-cap stocks such as KCB, Co-operative Bank, Equity, and EABL of 11.8%, 9.2%, 6.9%, and 6.9%, respectively. 

“The gains in banking stocks are partly attributable to increased local buying as investors anticipate the release of full-year results.pared to a turnover of Ksh 2.9 billion in the prior week,” observes Cytonn Investments. 

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Foreign investors accounted for 55.8% of the week’s total activity compared to 62.7% in the previous week. Foreign investors were net sellers for the fourth subsequent week posting net outflows of Ksh 1.7 billion compared to outflows of Ksh 300 million in the previous week. 

Last week, the NSE main index dropped to a 16-year low as foreign investors withdrew amid turmoil in global markets over the coronavirus outbreak and profit-taking hit banking stocks.

“The NSE was not immune to the sell-off as investors’ risk antennas shot-up. With the bleeding in developed markets, investors may seek to reduce exposure on equities in a capital preservation drive supporting further losses for the local stocks,” said analysts at NCBA in a weekly report.

According to the Central Bank Weekly Bulletin, the global market sentiment remained fragile driven by news reports about the coronavirus. Against this backdrop, the US Fed made an emergency rate cut of 50 basis points.

In addition, the IMF and the World Bank have committed USD 50 billion and USD 12 billion, respectively, to address the impact of coronavirus in emerging and developing countries.

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“Foreign selling pressure still exists and the business environment remains weak, with the Stanbic PMI pointing towards a contraction over the first two months of 2020.

Should the uptrend persist this week, we urge investors to take short positions or shed exposure at or near Ksh 33.0, Ksh 54.0 and Ksh 53.0 for SCOM, KCB and EQTY, respectively.

We encourage investors to target the June 18 Contract – Short position (for KCB and EQTY),”  Said Genghis Capital, Genghis Weekly Strategy Monday, March 9 th, 2020.

Source: Genghis Capital, Cytonn Investments and CBK

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