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Three shares making NSE buyers rich

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Capital Markets

Three shares making NSE buyers rich


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Securities dealer at NSE. FILE PHOTO | NMG

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Abstract

  • The three shares recorded a mixed achieve of Sh183.86 billion since January 1, representing 92.3 % of the 199.12 billion appreciation of all shares on the NSE.
  • The firms’ outsized affect on key market indicators has made it troublesome for buyers to measure the true efficiency of the bourse.
  • From the skin, the NSE seems to be to be on bull run and totally recovered from the consequences Covid-19 pandemic, as buyers financial institution on a rollout of coronavirus vaccines to maintain the worldwide financial restoration on observe.

Safaricom #ticker:SCOM, BAT Kenya #ticker:BAT and East Africa Breweries Restricted #ticker:EABL (EABL) accounted for 92 % of the rise in investor wealth on the Nairobi Securities Alternate (NSE) because the begin of the 12 months, exposing the distortion of the bourse’s efficiency by the blue chip shares.

The three shares recorded a mixed achieve of Sh183.86 billion since January 1, representing 92.3 % of the 199.12 billion appreciation of all shares on the NSE.

The firms’ outsized affect on key market indicators has made it troublesome for buyers to measure the true efficiency of the bourse.

From the skin, the NSE seems to be to be on bull run and totally recovered from the consequences Covid-19 pandemic, as buyers financial institution on a rollout of coronavirus vaccines to maintain the worldwide financial restoration on observe.

However a better overview of the market reveals that just a few shares have dominated the rally, with solely Safaricom, BAT and EABL recording double-digit development because the 12 months began.

Analysts reckon that buyers have targeted on companies that look set to climate financial shocks and with a practice of paying dividends.

“The rally remains to be very restricted and isn’t all the bourse. The market is choosing up success tales and operating with it,” stated Eric Musau, the pinnacle of analysis at Normal Funding Financial institution.

Cigarette producer BAT Kenya is the largest gainer this 12 months on the Nairobi bourse, recording a return of 21 % after its share closed buying and selling at Sh437 a bit yesterday.

The EABL share rose 13.2 % to Sh174.50 within the interval beneath overview whereas Safaricom gained 11.7 % to Sh38.25.

The telco, on account of its a lot larger variety of issued shares, recorded the largest absolute achieve in market capitalisation at Sh160.26 billion, accounting for 80 % of enhance in investor wealth on the NSE this 12 months.

Safaricom’s share rally has been linked to the latest announcement of a Sh0.45 dividend payout and the Central Financial institution of Kenya’s transfer in December to finish free M-Pesa transactions of as much as Sh1,000.

The waiver of fees on M-Pesa transactions — which have been launched to encourage cashless funds amid the Covid-19 pandemic —value telecommunications agency Sh9 billion within the six months to June.

Analysts reckon that buyers view EABL as a protected guess on the NSE in a 12 months when most companies are anticipated to report losses.

The brewer expects gross sales to recuperate from a coronavirus-induced droop within the second half to June as nations within the area chill out measures to curb the unfold of the virus.

The brewer posted a 3 % drop in web gross sales for its first half ended December as gross sales have been pummeled by the closure of bars. Publish-tax revenue plunged by a 3rd.

Dividends are an element within the BAT features. The cigarette make has maintained beneficiant dividend insurance policies for many years that has seen it pay almost all its web earnings to shareholders.

The agency, whose monetary 12 months ends in December, paid an interim dividend of Sh3.50 from its half 12 months to June 2020, when its web revenue rose by 5.9 % to Sh2.6 billion.

The Capital Markets Authority (CMA) has flagged the dominance of 5 firms — together with Safaricom — on the 65-stock Nairobi bourse as a giant danger, with the efficiency of their shares dictating whether or not the market goes up or down on any given day.

The highest 5 companies on the NSE have grown their share of the market’s complete investor wealth to greater than 80 %, up from 65 % three years in the past.

Safaricom alone is price greater than all the opposite listed companies mixed, with its valuation of Sh1.53 trillion accounting for 60.4 % of the NSE’s market capitalisation.

One of many elements behind the dominance of the 5 companies is the drought in massive ticket listings in recent times.

The companies are additionally liquid shares, providing buyers a possibility to enter and exit the counters with ease, analysts say.

Delisting of companies like KenolKobil and erosion in worth of hitherto blue chip shares like Kenya Airways and Kenya Energy have seen the 5 companies cement the stranglehold.

Three of the dominant companies — Safaricom, Fairness and Co-operative Financial institution — got here into the market throughout the IPO growth years of 2005 to 2009.

The CMA now says that it wants contemporary listings of excessive worth companies to appropriate the market imbalance.

“To diversify the quantity and high quality of listed entities the CMA is working with market gamers – Privatisation Fee, Kenya Personal Sector Alliance, and Kenya Affiliation of Producers amongst others in figuring out potential issuers inside the Kenyan market – each massive cap and SMEs as a approach of accelerating variety inside the Kenyan market,” stated the regulator.



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