NSE 20-Share Index falls below 2,500 points as bear run deepens

The Nairobi Securities Exchange (NSE) 20-Share Index slipped below 2,500 points Wednesday, deepening the bear run at the bourse as prices of key counters remained stuck at a decade low.

The benchmark 20-Share Index, seen as a key barometer that signals performance of the stock market, slipped to 2,488.31 points for the first time since March 2009 when the index was at 2,453 points.

During Wednesday’s trading, 20 counters remained dormant, including BAT #ticker:BAT , Umeme, Kenya Power #ticker:KPLC, East African Portland Cement Company #ticker:EAPCC, Crown Paints #ticker:BERG , Bamburi Cement #ticker:BAMB, Uchumi, I&M Holdings, DTB #ticker:DTK , Bank of Kigali, Car & General, Limuru Tea, Kapchorua Tea, Kakuzi, Gold Etf, Kenya Orchids, Flame Tree Group #ticker:FTGH and Eaagads.

Renaldo D’Souza of Sterling Capital said the decline could continue since there is no material development to spur the market.

“Generally, earnings have been poor and the economy is not performing; even the banks have not released strong performances. There may be slight improvements if the rate caps are removed. Otherwise there is nothing to spur the market,” he said.

Analysts expect that the bourse could slide even further after Safaricom #ticker:SCOM closes its dividend books next month.

Safaricom, which traded at Sh29.1 yesterday, has a capitalisation of Sh1.16 trillion, equivalent to half of the total value of the market, which stood at Sh2.3 trillion yesterday. Should Safaricom sneeze, the market may well catch a flu.

The telecommunications company announced a special dividend of Sh0.62 in May and a first and final dividend of Sh1.25, with its books set to close on September 2.

The NSE is suffering from twin problems of lack of foreign investor interest and reallocation of local investor wealth to fixed incomes as the market fails to offer an indication of an upside in the short run.

NSE chief executive Geoffrey Odundo yesterday attributed the bear run to global economics, especially interest rate volatility in the US and ongoing trade wars between the US, Iran and China; but some market analysts have pointed to the shilling.

“There is the issue of the shilling, which foreigners feel is over-valued, making stocks expensive, and since the market is dominated by foreigners we see the decline,” said Mr D’Souza.

Mr Odundo said there is a shift by foreign investors leaving frontier markets such as Kenya where they have been sitting since the 2008 global financial crisis.

The NSE boss also attributed the slide to cyclic movements, saying that the market offered an opportunity to buy.

“NSE is undergoing an occasional five-year slowdown synonymous with most stock exchanges. We expect it to rebound in coming days. Most counters are trading at a near original price, providing fertile environment for new buyers,” said Mr Odundo.

More than 22 stocks are trading below Sh10, out of which six are trading in the cents including Mumias, Uchumi, Home Afrika, Nairobi Business Ventures, Deacons and Eveready as well.

The NSE share itself has hit Sh11, just four cents away from a 52-week low.