Shares seen to rebound this year on increased earnings

Financial experts have forecast a double digit growth for the Nairobi All Share Index (NASI) which fell 8.6 per cent last year.

Key drivers for the growth are an earnings recovery and the return of foreign investors to the local market.

Analysts also note that Kenya’s Covid-19 positivity rate has gone down and a vaccine is expected in the country in the first or second quarter.

ICEA Lion Asset Management’s Head of Research Judd Murigi, while releasing an investment outlook for 2021 on Tuesday, said the NASI tends to recover strongly from bear market years.

“Based on trends in recent years, the NSE (Nairobi Securities Exchange) offers potential for strong double digit returns in 2021,” he said.

Mr Murigi added that on reduced loan losses, banks were expected to post sharp earnings growth, hence their tag as the most attractive stocks this year.

Last year, the banking sector had shares worth Sh56.5 billion transacted, which accounted for about 38 per cent of the year’s traded value, NSE data shows.

“Equities are at an attractive entry point and can deliver strong double digit returns in 2021, especially banking stocks,” added Murigi.

Safaricom is also expected to continue being a main feature. Last year it traded 2.4 billion shares valued at Sh71 billion, which represented 48.287 per cent of that year’s traded value.

ICEA Lion Asset Management noted that NASI’s fall would have been “far worse” if not for Safaricom, with bank share prices down by more than 25 per cent.

Data from NSE shows that last year, equity turnover fell 3.34 per cent to Sh148 billion.