Safaricom Plc CEO Peter Ndegwa during the telco’s 20-year celebration at the Nairobi Serena Hotel on October 27, 2020. PHOTO | NMG Safaricom’s share of combined investor wealth at the Nairobi Securities Exchange (NSE) touched a high of 63 percent yesterday after days of a steady rise in its stock prices in a period that has seen other dominant counters shed value.
The telco claimed at least half of the market wealth a year ago and has been deepening its share of the NSE wealth since then, a dominance that is making it difficult for investors to gauge the performance of the bourse.
Already, the Capital Markets Authority (CMA) has flagged the dominance of five companies — including Safaricom — in the 65-stock market as a big risk, with the performance of the telecommunication firm dictating whether the market goes up or down on any given day.
Safaricom share has gained 8.2 percent or Sh3.25 a piece since Friday to close trading at Sh42.75 yesterday, adding Sh130 billion on its market value, taking it to Sh1.712 trillion. Total market value stood at Sh2.72 trillion.
Investors rushed to buy the company shares after it was awarded a licence on Saturday to enter Ethiopia’s underserved telecoms market.
The rally has taken Safaricom’s share price gain to 45.6 percent over the past 12 months, bucking the general bear run on the NSE that has been fuelled by the Covid-19 pandemic.
Safaricom, Equity Bank Group, East Africa Breweries Limited, KCB Group and Co-operative Bank have always accounted for more than 80 percent of the total investor wealth at the NSE. But all the dominant firms, save for Safaricom, have either shed value or gained at a slower pace compared to the telco in recent weeks.
From Friday, Equity Bank share has gained 2.6 percent, EABL four percent while KCB has shed 2.9 percent.
At Sh1.712 trillion, Safaricom is now 11 times larger than Equity Holdings (Sh158.7 billion), the second most valuable company at the Nairobi bourse.
“The large market cap for Safaricom has been a concern for us for a few months now, where you have one stock accounting for over 60 percent of the market. This means that its movement determines the movement of the market,” said Lisa Kimathi, an analyst at Standard Investment Bank.
This oversized influence of the stock on the market is also seen in the daily traded volumes, where in the past two sessions it has accounted for […]
