During the week, the equities market recorded mixed performance, with NASI and NSE 20 gaining by 0.2 percent and 0.5 percent, respectively.
The NSE 25 declined by 0.2 percent, taking their YTD performance to gains of 17.7, 5.8, and 14.2 percent for NASI, NSE 20, and NSE 25, respectively.
The equities market performance was mainly driven by gains recorded by stocks such as BAT Kenya and Bamburi of 4.3 and 2.1 percent, respectively. The gains were however weighted down by losses recorded by banking stocks such as Co-operative Bank and Diamond Trust Bank Kenya (DTB-K) which declined by 3.0 percent and 1.9 percent, respectively.
During the week, equities turnover increased by 0.2 percent to USD 17.0 mn, from USD 16.9 mn recorded the previous week, taking the YTD turnover to USD 711.4 mn.
Foreign investors remained net buyers, with a net buying position of USD 0.4 mn, from a net buying position of USD 1.0 mn recorded the previous week, taking the YTD net selling position to USD 24.8 mn.
The market is currently trading at a price-to-earnings ratio (P/E) of 14.2x, 9.6 percent above the historical average of 12.9x, and a dividend yield of 3.5 percent, 0.5 percentage points below the historical average of 4.0 percent.
Key to note, NASI’s PEG ratio currently stands at 1.6x, an indication that the market is trading at a premium to its future earnings growth.
Basically, a PEG ratio greater than 1.0x indicates the market may be overvalued while a PEG ratio less than 1.0x indicates that the market is undervalued.
Excluding Safaricom, the market is trading at a P/E ratio of 12.7x and a PEG ratio of 1.4x. The current P/E valuation of 14.2x is 83.9 percent above the most recent trough valuation of 7.7x experienced in the first week of August 2020.
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“We are “Neutral” on the Equities markets in the short term. With the market currently trading at a premium to its future growth (PEG Ratio at 1.6x), we believe that investors should reposition towards companies with a strong earnings growth and are trading at discounts to their intrinsic value,” More Articles From This Author