NSE jumps to 14-month high on Safaricom, banks

The wealth of investors at the Nairobi Securities Exchange (NSE) Thursday hit a 14-month high following the rally in bank stocks and the Safaricom #ticker:SCOM share.

The Nairobi bourse closed trading Thursday with a market capitalisation of Sh2.527 trillion—the highest level since August 14, last year, uplifting a market has been on a bear run for the past two years.

The rally has seen investors gain more than Sh300 billion in paper wealth over the past month with those holding Safaricom and banking stocks emerging as key beneficiaries.

The Safaricom share touched a 20-month high of Sh31.20, up from Wednesday’s closing price of Sh30.70.

This added Sh20 billion to the wealth of Safaricom owners, an increase that compensated for the Sh12.9 billion drop in banking stocks as investors raced to profit from the stocks that have been

on the rise since October 17.

The Safaricom share movement has a huge bearing on the overall market performance given it accounts for 49 percent of the NSE market value, which grows to 79.8 percent when banking stocks are included.

Senior investment analyst for East and Southern Africa at Tellimer Faith Mwangi said the excitement about the banking stocks was cooling off.

President Uhuru Kenyatta’s memo to have a cap on commercial lending rates removed was passed in Parliament Tuesday evening following a quorum hitch, potentially boosting the flow of credit to the economy and return of expensive credit.

This on Wednesday backed the rally in banking stocks — which have surged since October 17 when news leaked of the possible removal of the cap — at the NSE.

All the 11 banks listed at the Nairobi bourse had gained between October 17 and Wednesday in what stock dealers linked to increased demand for the lenders’ shares on the expectation of increased profitability and stock gains.

The wealth of the investors holding the banks’ stocks jumped by Sh25 billion on Wednesday to hit Sh777.3 billion, up from Sh641.44 billion on October 17. This means that banking shares have gained Sh133 billion in the period.

On Thursday, six out of the 11 banking stocks shed value with Equity #ticker:EQTY leading with a Sh5.66 billion loss as the share moved from Sh50.25 to close at Sh48.75. Barclays #ticker:BBK shed Sh4.3 billion while NCBA #ticker:NIC lost Sh2.17 billion.

“Wednesday’s confirmation was expected and there is a bit of pressure coming off now. The excitement of rate cap removal has now passed and investors have adjusted to the news,” said Ms Mwangi.

“Investors are holding onto their money just to hear what the banks have to say going forward. We will see more reaction based on results and banks’ pronouncements on the strategy post rate cap.”

But analysts reckon that Safaricom has headroom to rise further.

AIB Capital head of research Sarah Wanga said investors were buying into Safaricom on the back of its recent financial report and outlook.

The telecoms operator posted a 14.4 percent jump in the half-year net profit to Sh35.65 billion on strong M-Pesa and mobile data revenue growth. The results were released last Friday.

“The upside potential of the share is at about Sh33 so there is more room. The strong performance in M-Pesa and prospects of entering Ethiopia offer a bright outlook. The cost efficiencies are also strong,” said Ms Wanga.