Securities trader at NSE. FILE PHOTO | NMG Safaricom #ticker:SCOM, BAT Kenya #ticker:BAT and East Africa Breweries Limited #ticker:EABL (EABL) accounted for 92 percent of the increase in investor wealth at the Nairobi Securities Exchange (NSE) since the start of the year, exposing the distortion of the bourse’s performance by the blue chip stocks.
The three stocks recorded a combined gain of Sh183.86 billion since January 1, representing 92.3 percent of the 199.12 billion appreciation of all shares at the NSE.
The companies’ outsized influence on key market indicators has made it difficult for investors to measure the true performance of the bourse.
From the outside, the NSE looks to be on bull run and fully recovered from the effects Covid-19 pandemic, as investors bank on a rollout of coronavirus vaccines to keep the global economic recovery on track.
But a closer review of the market reveals that a few stocks have dominated the rally, with only Safaricom, BAT and EABL recording double-digit growth since the year started.
Analysts reckon that investors have focused on firms that look set to weather economic shocks and with a tradition of paying dividends.
“The rally is still very restricted and is not the entire bourse. The market is picking up success stories and running with it,” said Eric Musau, the head of research at Standard Investment Bank.
Cigarette manufacturer BAT Kenya is the biggest gainer this year at the Nairobi bourse, recording a return of 21 percent after its share closed trading at Sh437 a piece yesterday.
The EABL share rose 13.2 percent to Sh174.50 in the period under review while Safaricom gained 11.7 percent to Sh38.25.
The telco, on account of its much bigger number of issued shares, recorded the biggest absolute gain in market capitalisation at Sh160.26 billion, accounting for 80 percent of increase in investor wealth at the NSE this year.
Safaricom’s share rally has been linked to the recent announcement of a Sh0.45 dividend payout and the Central Bank of Kenya’s move in December to end free M-Pesa transactions of up to Sh1,000.The waiver of charges on M-Pesa transactions — which were introduced to encourage cashless payments amid the Covid-19 pandemic —cost telecommunications firm Sh9 billion in the six months to June.Analysts reckon that investors view EABL as a safe bet at the NSE in a year when most firms are expected to report losses.The brewer expects sales to recover from a coronavirus-induced slump in the second half […]
