Equities in July On a Downward Trend as Week 1 of August Follows Suit

Equities were on a downward trend for the month of July with NASI, NSE 20 and NSE 25 declining by 0.9, 0.2, and 0.1 percent, respectively.

The decline recorded in NASI was driven by declines in large-cap stocks such as NIC Group, Diamond Trust Bank, and Safaricom, whose declines of 5.7, 2.6, and 2.1 percent, respectively.

Consequently, the decline outweighed the gains made by KCB Group, BAT, Equity Group Holdings and EABL of 4.6 percent, 3.0 percent, 2.7 percent, and 2.5 percent, respectively.

According to Cytonn Investments weekly report , the first week of August also recorded a decline in equities with NASI, NSE 20 and NSE 25 declining by 0.4 percent, 2.5 percent, and 0.7 percent, respectively, taking their YTD performance to gains/(losses) of 5.6, (8.7) and 0.9 percent, respectively.

The decline in NASI was largely due to losses recorded in large-cap counters such as Bamburi and NIC Group, which recorded losses of 7.2 and 1.7 percent, respectively.

Equities turnover increased by 4.6 percent during the month to USD 108.3 million, from USD 103.6 million in June 2019.

Foreign investors remained net sellers for the month, with a net selling position of USD 20.6 million, a 133.3 percent increase from June’s net selling position of USD 8.8 million.

For this week, equities turnover decreased by 8.9 percent to USD 21.3 million, from USD 23.4 million the previous week, bringing the year to date (YTD) turnover to USD 882.8 million.

Foreign investors were net buyers for the week, with a net buying position of USD 2.1 million, as compared to last week’s net selling position of USD 4.3 million.

The market is currently trading at a price to earnings ratio (P/E) of 11.5x, 13.5 percent below the historical average of 13.3x, and a dividend yield of 5.3 percent, above the historical average of 3.8 percent.

With the market trading at valuations below the historical average, analysts believe there is value in the market. The current P/E valuation of 11.5x is 18.6 percent above the most recent trough valuation of 9.7x experienced in the first week of February 2017, and 38.6 percent above the previous trough valuation of 8.3x experienced in December 2011. Read Also: July’s T-Bill Subscription Skyrocketed To 134.8 Percent More Articles From This Author

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