NSE’s index hit historic 5,000 mark buoyed by foreign buys

BY JAMES ANYANZWA AND REUTERS

KENYA: Nairobi Securities Exchange (NSE) experienced a beehive of activities over the last five days with foreign investors scrambling for a share of the market, which observers opine is highly undervalued.

Increased buying of shares by foreign investors saw the NSE 20-Share index cross the 5,000 points psychological mark on Wednesday with analysts projecting the bullish momentum to be sustained in the short-term.

“I think the overwhelming interest we are seeing in the market is being driven by positive expectations of the country’s economic performance this year,” said Geoffrey Odundo, Managing Director and Chief Executive of Kingdom securities Ltd, a subsidiary of the Co-operative Bank of Kenya.

“This year, the economy looks quite positive and on track to attain a 5.6 per cent growth.”

Market rally

Odundo also attributed the rally at the NSE to macroeconomic stability and improved investor confidence following the recent visit to Kenya by the International Monetary Fund (IMF) Managing Director Christine Lagarde.

“I think the market is still undervalued and this rally might be sustained in the short-term,” Odundo told The Standard yesterday.

The NSE 20-Share Index gained 17.81 points on Wednesday’s trading to close at 5,010.93 points.

On Thursday (January 9) the market continued charging upwards for the fourth consecutive day with the Index rising 0.67 per cent to 5,044.4, up from 5,010.9 recorded on Wednesday.

All Share Index (NASI) was also up 1.24 points to stand at 141.59, with market capitalisation standing at Sh1.9 trillion and edging closer historical Sh2 billion mark.

Foreign buys constituted 62.86 per cent of the market transactions.

The market investors have not been deterred by violence in African markets, notably the attack on a Nairobi shopping mall in September, which killed 67 and in Nigeria where thousands have died since the Islamist group Boko Haram launched an uprising against the state in 2009.

The continent has also been less sensitive than other high-yielding markets to the prospect of the US Federal Reserve reducing its stimulus programme from this month, although that will still be a risk.

“It’s more about the growth story locally,” Razia Khan, head of Africa research at Standard Chartered told Reuters in an interview. “The Africa growth story is consistent, the impact will still be positive.”

The IMF forecasts economic growth in sub-Saharan Africa will accelerate to six per cent this year, from an estimated five per cent in 2013.

But some of last year’s outperforming stocks may find the going tougher.

Kenyan power generation company KenGen soared more than 50 per cent in 2013, but further gains may be hobbled by huge capital raising to finance new generation plans.

Last year the NSE faced a serious of mixed fortunes with investors coming face to face with various domestic and external shocks.

The first half of the year (January-June) was characterized by a stable macro-economic environment which saw the NSE 20-Share Index and the Nairobi All Share Index (NASI) gain 10.39 per cent and 21.73 per cent respectively.

 However the second half of the year (June-December) was hit by key events including the implementation of the Value Added Tax (VAT) Act, increased political risk as a result of the Westgate Mall attack, and the US government shutdown that resulted in a slowdown in growth.

According to analysts at AIB Capital Ltd the financial, energy and telecommunications sectors led the race with specific counters displaying exemplary returns.

 “On the other hand manufacturing, commercial and services and energy have specific counters relegated to the top losers list,” says Parshv Shah, Investment Analysts at AIB Capital Ltd.

 “In conclusion, we expect Centum and Safaricom to remain in the top gainers list for the year on the back of foreigners attracted to Safaricom and positive investor sentiments toward centum growth.”