Nairobi Securities Exchange CEO Geoffrey Odundo. PHOTO | NMG BAT Kenya , East Africa Breweries Limited (EABL) and Safaricom led five stocks whose increase in investor wealth at the Nairobi Securities Exchange (NSE) since the start of the year surpassed the remaining 50 companies.
The five stocks recorded a combined gain of Sh334 billion since January 1, representing 107.7 per cent of the Sh310 billion appreciation of all shares at the NSE.
This is exposing the distortion of the bourse’s performance by the blue-chip stocks, which is making it difficult for investors to gauge the performance of the NSE.
The NSE seems to be on a bull run and fully recovered from the effects of Covid-19, 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 12 stocks including Equity Bank, , KCB Group and Nation Media Group 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.
NSE chief executive Geoffrey Odundo said the gains are supported by strong fundamentals of firms such as Safaricom and banks as well as Kenya’s increased weighting on the Morgan Stanley Capital International (MSCI) emerging markets index.
The MSCI has become one of the guides on how foreign investors allocate their resources in emerging countries like Kenya.
Kenya’s weight in the index increased to 9.49 per cent from about 8.2 per cent, meaning foreign investors can allocate more money for NSE investments.
“Our weighting improved so they are happy to improve their holding in key stocks such as banks and telcos. It is generally an appreciation of the resilient performance of our companies and regional expansion of firms such as Equity and now Safaricom,” said Mr Odundo.
“Safaricom and some of the banking stocks are part of the composite index and that becomes a natural pick for foreigner’s portfolio. This explains why they continue doing better.”But the Nairobi bourse is dimmed by the rising dominance of top five stocks that now account for 80.2 per cent of the entire market value of Sh2.42 trillion, up from 65 per cent three years ago.The Capital Markets Authority (CMA) has flagged the dominance of five companies as a big risk, with the performance of their shares dictating whether the market goes up […]