Kenya market watch: BAT, EABL, Limuru Tea & East African Cables post solid earnings

The Kenyan stock market continues to witness volatility as companies release their half-year earnings reports. Despite the challenging economic conditions, some firms have managed to post solid results, while others have struggled to maintain growth. In a recent interview with Samuel Gichohi, Head of Business Development at NCBA Investment Bank, several key points were discussed regarding the current state of the market. The earnings season has been mostly positive for the banking sector, with double-digit profit growth, although KCB lagged behind its peers. Gichohi highlighted that ongoing economic challenges are likely to lead to a slowdown in profit growth across various industries. The agricultural sector, in particular, has been affected by declining international market prices, impacting the profitability of companies producing commodities like macadamia nuts. Additionally, the anticipation of interest rate hikes by the Federal Reserve could further strain the Kenyan market, leading to increased inflationary pressure and reduced disposable income for consumers. This, in turn, is expected to affect company revenues and profits. Gichohi noted that institutional and foreign investors have been less active in the market, resulting in low trading volumes and minimal excitement among investors. Blue-chip stocks have remained relatively stagnant, with significant changes requiring substantial corporate actions. Speculative investors may find opportunities in short-term volatility as the market undergoes a period of stagnation. The NSE 20 share index, while experiencing minor fluctuations, is not indicative of a bearish market but rather reflects a transitional phase. Foreign exits from key stocks like Safaricom have reduced foreign ownership, leading to a more subdued market environment. Gichohi emphasized the importance of investor sentiment over fundamental company strength in driving investment decisions in the current climate. Despite low trading volumes, the equity market saw some activity with 22 million shares traded last week, valued at 460 million shillings. In contrast, the bond market showed impressive numbers, closing at 8.2 billion shillings, as investors sought safety in short-term bonds amidst market uncertainty. Gichohi highlighted that retail investors are increasingly turning to bonds due to attractive yields and perceived stability compared to equities. Overall, the Kenyan stock market is navigating a challenging landscape influenced by external factors and internal economic conditions, requiring investors to adopt a cautious and strategic approach to decision-making.