Kenya: NSE investors reap $166mn from small cap stocks
Stocks of Kenya's bourse Nairobi Securities Exchange firms valued below $26.7 million dominate the list of counters that have created paper money for investors this year, defying the prevailing plunge in the equities. Moreover, the Treasury faces medium to long-term refinancing pressures from shortened maturity times for bonds, as it seeks to avoid the issuance of long-dated securities. Wesley Manambo, Equities Analyst, Genghis Capital joins CNBC Africa for more.
Fri, 20 Oct 2023 10:18:54 GMT
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AI Generated Summary
- Small-cap stocks valued below $26.7 million at Nairobi Securities Exchange outperform big players, defying market plunges.
- Foreign investors' sentiments driving market movements, with recalibration of portfolios impacting key companies like Safaricom and KCB.
- Local investors stepping in to fill foreign investment gap, but market remains suppressed with bond market facing risks and potential yield shifts.
In a year marked by plunges in equities, the Nairobi Securities Exchange in Kenya has seen small-cap stocks valued below $26.7 million emerge as the unlikely heroes, creating paper money for investors. With 15 out of 24 funds gaining value since the start of the year, the performance of these smaller firms has defied the odds. However, the country's Treasury is facing refinancing pressures due to shortened bond maturity times. Wesley Manambo, Equities Analyst at Genghis Capital, shed light on these market dynamics in an interview with CNBC Africa. The stock market's movement in Kenya is heavily influenced by foreign investors, with their sentiments driving market trends. Foreign players have been recalibrating their portfolios in lower-tier emerging and frontier markets, opting for fixed income instruments in their home markets, offering more attractive returns in dollar terms. This has led to lower activity in significant companies like Safaricom, EABL, and Equity, impacting overall market performance. Safaricom alone has accounted for 76% of foreign outflows year-to-date, reflecting the impact of foreign investors on the market. The banking sector, particularly KCB, has faced challenges, with market valuation hitting an 11-year low. Investors have priced in risks related to non-performing loans, creating opportunities for entry at attractive points. The week's biggest movers and losers included Safaricom leading foreign exits, EA Portland gaining on legal victories, and Express Kenya and others lagging in performance. Local investors have stepped in to fill the gap left by foreigners, but the market remains suppressed due to mismatched demand and supply dynamics. Treasury bond durations have fallen amid standoffs between the Central Bank and investors, signaling heightened risks and potential upward shifts in yields. Looking ahead, sentiment remains consistent, with opportunities for investors to capitalize on lower entry points for potential gains. Increased turnovers are expected next week with a five-day trading week, but minimal movements in benchmark indices are projected.
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