Nairobi Bourse Stocks Continue to Tumble Breaching Bear Market Mark

Kenyan Equities Continue Downward Trend

The  Nairobi bourse continued to witness increased outflow of funds as key indices breached the threshold of a bear market.

This is attributed to the continuous selling on the coronavirus outbreak.

According to the Central Bank’s weekly bulletin, during the week ending March 26, NASI, NSE 25 and NSE 20 share price indices, declined by 5.9 percent, 7.9 percent and 6.9 percent, respectively.

“NSE 20 share index (was) trading at a 17-year low, closing at 1,917.7 compared to the previous low of 1,948.5 recorded in 2003. The YTD losses of all the three indices breach the threshold of a bear market, which is a condition in which securities prices fall by 20.0% or more,” According to analysts from Cytonn Investments.

The performance of the NASI was driven by losses recorded by most large-cap stocks, with EABL, Equity, KCB Group and ABSA recording losses of 15.1%, 14.8%, 13.7%, and 10.7%, respectively.

Equities turnover decreased by 25.3% during the week to USD 37.3 million, from USD 50.0 million recorded the previous week, taking the YTD turnover to USD 428.2 million. 

Foreign investors remained net sellers for the week, with a net selling position of USD 17.6 million, from a net selling position of USD 28.9 million recorded the previous week. 

“The trend reflects the global equity markets with foreign investors disposing riskier assets in favor of safe havens,” adds Cytonn. But, the Central Bank noted that volatility in the global financial markets eased towards the end of the week. 

During the week, KCB group announced that it has set aside a Kshs 30.0 billion credit facility, in an effort to cushion individuals and businesses grappling with the effects of the Coronavirus pandemic.

ABSA Bank Kenya announced its intentions to pay all supplier invoices within 14-days, with invoices of Kshs 1.0 million and below being paid within 7-days.

The Monetary Policy Committee (MPC) lowered the Cash Reserve Ratio (CRR), which is a fraction of total customer deposits that the commercial banks have to hold with the central bank, from 5.25% to 4.25%.

Equity Bank Congo, to create second-largest bank in DRC

Equity group was given the green light by the Committee Responsible for Initial Determination (CID), a Commission mandated to monitor and investigate possible breaches of the COMESA Competition Regulations, to acquire a 66.5% controlling stake worth Kshs 10.9 billion in Banque Commerciale du Congo (BCDC), effectively valuing BCDC at Kshs 16.4 billion. 

BCDC’s profit after tax stood at 1.2 billion as at 2018 with a shareholders’ equity of Kshs 10.0 billion. 

The transaction will see Equity Group pay Kshs 17,430 per share to acquire 625,354 shares in BCDC, a deal inclusive of dividends issued as at 1st January 2020, from the George Arthur Forrest family, and will see Equity integrate the bank with its subsidiary, Equity Bank Congo, to create the second-largest bank in Democratic Republic of Congo (DRC).