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Tracking movements shaping Kenya’s market space
The banking sector was the most active at the Nairobi Securities Exchange when trading closed last week, with shares valued at Ksh 1.8 billion transacted which accounted for 60.96 per cent of the week’s traded value. KCB was the top mover in this sector with 21 million shares and Equity Group Holdings trading a total of 20 million shares during the week. Safaricom Plc dropped its position as the top mover as investors reacted to a decline in the firm's net earnings for the 2020/21 financial year. Solomon Kariuki, Investment Analyst at Cytonn joins CNBC Africa for more.
Mon, 17 May 2021 11:30:48 GMT
Disclaimer: The following content is generated automatically by a GPT AI and may not be accurate. To verify the details, please watch the video
AI Generated Summary
- The banking sector emerged as the most active segment at the Nairobi Securities Exchange, accounting for over 60% of the week's total traded value, with KCB and Equity Group Holdings leading the pack.
- Investor interest in government securities remains strong, with the 364-day Treasury bill attracting significant subscriptions and offering an attractive interest rate of 9.4% for entities like insurance and pension schemes.
- Equity market trends showcased a mix of gainers and losers, with SafariCom witnessing a decline following financial results, while potential strategies for Uchumi Supermarket PLC's revival were discussed, emphasizing debt repayment and privatization as key steps.
The Nairobi Securities Exchange saw significant activity in the banking sector last week, with shares valued at over 1.8 billion Kenyan Shillings traded, representing 60.96% of the week's total traded value. KCB emerged as the top mover in this sector, with 21 million shares changing hands, closely followed by Equity Group Holdings with a total of 20 million shares traded during the week. Meanwhile, Safaricom Plc experienced a decline in its position as the top mover as investors reacted to a drop in the firm's net earnings for the 2020/2021 financial year. Solomon Kariuki, an Investment Analyst at Cytonn, shared insights on the recent developments in the market.
Investors continued to show interest in government securities, with the subscription rate for Treasury bills remaining strong. The 364-day paper, favored by most institutional investors, recorded a subscription rate of 110.7%, indicating confidence in a potential containment of COVID-19 and widespread vaccination within a year. Factors such as an attractive interest rate of 9.4% for entities like insurance and pension schemes also contributed to the demand for these securities. Despite a decline in subscriptions for the 182-day and 91-day papers, the interest rates for these securities saw an uptick. The 91-day paper is currently trading at 7.2%, while the 182-day paper stands at 8%, making the 364-day paper the most attractive option at 9.4%.
The government also conducted a tap sale on two bonds, the FXD2 2019 for 15 years and FXD1 2021 for 25 years. While the subscription rate for these bonds was slightly lower at 104.7%, investors showed a preference for the shorter-dated 15-year paper over the 25-year option. The government's continued efforts to manage its debt obligations were evident in the acceptance rate of around 98.9%, highlighting the need for cost-effective financing options.
In the equity market, top gainers included DTB and BAT, while SafariCom and Carbacid were among the losers. The decline in SafariCom's stock price can be attributed to investors reacting to the firm's financial results. However, the recent announcement of partnerships with Amazon and entry into the Ethiopian market could potentially boost investor confidence in the coming weeks. On the flip side, Uchumi Supermarket PLC recorded a significant decline of 8%, indicating ongoing challenges for the company.
Solomon Kariuki also shared insights on potential strategies for Uchumi Supermarket PLC's revival, suggesting debt repayment and privatization as key steps. Drawing parallels with successful players in the digital sector like Quickmart and Naivas, which engaged private equity investors, Kariuki emphasized the importance of government support and stake selling to private investors in reviving Uchumi's performance.
When asked about stocks to watch, Kariuki highlighted banking counters such as KCB and Equity Bank as favorable options, along with a potential opportunity in the IMF stock despite recent fluctuations. Additionally, keeping an eye on SafariCom was advised, given its growth prospects and anticipated returns for investors.
In conclusion, the Nairobi Securities Exchange continues to witness dynamic movements, with the banking sector driving significant activity. Government securities remain attractive to investors, signaling confidence in the economic recovery post-COVID-19. Equity market trends reflect a mix of gainers and losers, with strategic insights provided for potential investors looking to navigate the evolving market landscape.
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