Half of Nairobi bourse firms fail to recover from Covid-19

Half of Nairobi bourse firms fail to recover from Covid-19

More than half of stock prices at the Nairobi Securities Exchange (NSE) have yet to return to their pre-Covid-19 levels amid the full recovery of the bourse and economic revival from the pandemic-induced slump.

Of the 58 actively traded counters, 31 are trading below their closing price on March 12, 2020, when Kenya announced the first case of Covid-19 that pulled down the main market index to a 20-year low as investors dump stocks.

This emerged as the combined wealth of investors at the NSE grew Ksh610 billion ($5.5 million) over the period.

Investors have become selective during the recovery and are putting money in companies that are viewed to be stable against the effects of coronavirus, rewarding stocks such as Safaricom, BAT and Equity.

Firms that have made positive corporate moves in the stock market such as bonus issuances and buyouts like Nairobi Business Ventures (NBV) have also recorded higher gains relative to peers.

But investors have punished top firms viewed to struggle under effects of Covid-19, including East Africa Breweries Limited (EABL), Centum Investment, Kenya Power and Scangroup.

Depressed advertising spend has hurt Scangroup while lower electricity consumption and shortened business hours pummelled Kenya Power and EABL sales, respectively.

“Value investors have concentrated on stocks with a good earnings potential, mainly Safaricom and banks. Speculative investors have also made handsome profits on counters such as Nairobi Business Ventures (NBV),” said Sarah Wanga, AIB-AXYS Africa head of research.

Safaricom’s share price has gained 62 percent since Covid-19 first hit Kenya in March 2020, closing at Ksh41.80 ($0.38) a unit on Friday.

This gain has entrenched its position as the NSE’s dominant stock, accounting for 60 percent of the market’s total capitalisation or investor wealth that stands at Ksh2.77 trillion ($25 billion).

Its stock appreciation came on the back of the telco paying total dividend of Ksh1.37 per share for the year ended March 2021, amounting to Ksh54.89 billion ($497 million).A consortium led by Safaricom aims to start operations in Ethiopia next year after winning a licence in May, further upping demand for the telecoms operator shares at the NSE.Safaricom has been the standout stock among a group of blue chip counters that have defied the pandemic to either record gains or maintain their share prices, but banks have underperformed on reduced profits and failure to pay dividends.Out of the 11 listed local banks, eight are still trading below their March 2020 prices, with the only gainers being Equity […]

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