Stocks trading at the Nairobi Securities Exchange continued their strong rally for a 10th straight session in what some analysts described as “mad rush” for equities following a dip in interest rates.
Market report released this evening showed the reflective NSE 20 Share Index-that tracks performance of the 20 most valuable stocks- edged up by a further 3.95 percent or 189.57 points day on day to 4985.91 by close of business.
The NSE-20 share index has returned 16.05 percent since the year started, data kept by Bloomberg further shows.
The sustained momentum has, among other reasons, been interpreted to signal that charges against humanity that Mr Kenyatta faces at the International Criminal Court was a non-issue among investors at the moment.
Equity analysts at Genghis Capital said the surge is being fuelled by local institutional and retail investors who were trooping back to the market after peaceful March 4 elections that declared Mr Uhuru Kenyatta president-elect on Saturday.
Most of them had adopted a wait-and-see attitude prior to polls unlike the foreign ones who had kept faith in the market, said Antony Kimani, a research analyst with Genghis.
On Monday, data compiled by the Nairobi-based brokerage firm put the ratio of local investors to foreigners at 70 percent- a reverse of trends seen during pre-elections period.
“Most of the local investors had stayed out of the market awaiting the outcome of the elections,” Mr Kimani said in telephone interview in Nairobi. “Some are coming back because the interest rates have gone down and they are now looking at safer instruments to put in their money.”
At today’s session, stocks experienced premium valuation as a considerable number of companies traded their shares at record prices.
Only two counters notably exchanged their shares at a reduced price day on day.
They included CfC Stanbic Holdings, owned 60 percent by South Africa’s Standard Bank, that dropped 1.60 percentage points after a gaining streak last week, and Access Kenya whose price declined by 2.88 per cent.
Hotel chain firm, TPS Serena E.A, was the day’s largest gainer, trading 10 per cent higher than Monday’s price to KSh55.
State-owned National Bank, TransCentury Ltd, Kenya Electricity Generating Company(KenGen) and cement maker Athi River Mining were the other winners that made the top five list, gaining 9.8,9.73, 9.67 and 9.63 per cent, respectively.
Leading telcoms firm, Safaricom (valued at Ksh252 billion) was the most active counter exchanging 24.59 million shares at Sh6.25 a share which was a1.6 per cent rise.
Mumias Sugar Company (valued at KSh7.34 billion), Kenya Power and Lighting Company(KSh39.52 billion), Co-operative Bank(Sh75.06) and KCB Group(KSh118.01 billion) were also dominant in trade volumes with 6.45, 6.09, 4.39 and 2.12 million shares, respectively.
However, the premium valuations of stocks were not sustainable long term, Mr. Kimani projected.
The sharp-edged equities were likely to go back to subdued rallies in the next two to three months in favour of the debt market, he said.
“After the county governments takes shape, we are going to see increased activity in the fixed income securities as they look for money to implement their projects. This will push interest up and investors are likely to shift to that segment.”
The just-ended elections ushers in two new governance systems-the Central Government and 47 County Governments with separate but complementing powers- under the year 2010 Constitution.
The local currency, on the other hand, remained firm against the US Dollar at unchanged levels of 85.82, according to data from the Central Bank of Kenya.
The relatively stable shilling was said to be riding on expectations around benchmark interest rate that was retained at 9.5 per cent on Tuesday afternoon.
In retaining its key lending rate, the chief lender’s Monetary Policy Committee cited risks in macroeconomic outlook that revolves around renewed upward drift in international oil prices.
The MPC also pointed at a weak outlook for the global economy with “expectation of a more pronounced recession in the eurozone and a slow recovery of the US economy” in a press statement Tuesday afternoon.
“This outlook, coupled with persistent balance of payments pressures due to the high current account deficit remain a threat to general stability of prices,” the press dispatch added. “However, the Committee will continue to closely monitor the macroeconomic aggregates and expectations dynamics to ensure that the policy stance continues to deliver the desired price stability.”
The rate will stand for the next two months when the committee is expected to meet again to either review or retain it.
The decision came a day after Finance minister Njeru Githae asked the Central Bank to stay ahead of development so the country does does slip back to macroeconomic mayhem of 2011 that saw headline inflation peak at 19.72 per cent in November.
The shilling also slipped to a record low of 107 against the US dollar on October 11 that year.
“What we are emphasising is the stability of the shilling because up and downward movement would affect investor’s decisions and also payment of debt,” said Githae on Monday.
