Five large-cap stocks make up 74.14 percent of the Nairobi Securities Exchange (NSE) market capitalization in quarter one of 2019 up from 73 percent last quarter of 2019.
According to the 14th Edition of the Capital Markets Soundness Report (CMSR) released Tuesday, the stock market is vulnerable to a lack of diversification.
CMA said this was the “highest in the last four quarters, further increasing the exposure risk that the Kenyan market faces.”
Safaricom Plc, Equity Bank, East Africa Breweries Limited, KCB and Co-operative Bank maintained dominance at the NSE between January and March.
Currently, Safaricom’s KSh1.2 trillion market capitalisation leads with 60 per cent of the value of NSE listed firms, followed by Equity Group (KSh188 billion), EABL (KSh169 billion), KCB Group (KSh167 billion) and Co-operative Bank (KSh89.4 billion).
To diversify the number and quality of listed entities CMA said it is working with market players in identifying potential issuers within the Kenyan market – both large-cap and SMEs as a way of increasing diversity within the Kenyan market.
“In the long term, a positive outlook prevails as some companies have expressed interest in going public within the next 2 to 3 years,” CMA report said.
The market has had no other initial public offer since October 2015.
In addition, the value of listed firms at the bourse fell by 14.5 percent from Ksh 2.36 trillion in March 2019 to Ksh 2 trillion registered at the end of 2020.
- KCB Group Most Liquid Futures Contract at NSE Derivatives Market Q1.2020
The quarterly market soundness report, average foreign investor participation during the quarter averaged at 61.2 percent which is a 1.82 percent decrease from 63 percent recorded in Q4.2019.
Foreign investors dominated market activities in the period of January to March averaging 61.14 percent 1.82 percent decrease from 62.96 percent recorded in Q4.2019.
Net Foreign Portfolio levels during the quarter amounted to a total outflow of Ksh 844 million compared to a total inflow of Kshs 262 million in net.
CMA says this was expected due to the global Covid-19 pandemic. “The Authority in conjunction with NSE and industry players continue to market the Kenyan market as a safe haven for investments for foreigners in the long term.”
“The Authority is keen to ensure that the capital markets remain functional and accessible during this challenging period, through collaborative efforts with industry stakeholders. More specifically efforts, have been made to ensure the continued stability of the market infrastructure and facilitating smooth operation and business continuity by market intermediaries,” says CMA acting chief executive officer Wyckliffe Shamiah.
The Capital Markets Soundness Report examines global, regional and domestic political and socio-economic events that pose risks to the performance of the capital markets and facilitate informed debate amongst industry players, policymakers, and investors on market soundness.