During the quarter, there have been notable out-performers across the market. Standard Group (+35.7%), Jubilee Holdings (+11.6%), Flame Tree Group (+9.9%) and BOC Gases (+8.6%) gave investors the best returns so far in the quarter. This was against the general market return of 2.4% and -3.9% on the NASI and NSE-20, respectively. The key index counters are all negative (except Safaricom which is at break-even) with the key banks (Equity, KCB and COOP) sharply lower, on average by 31.2% year-to-date while EABL and BAT Kenya are in the negative (-19.4% and -27.0%, respectively) year-to-date.
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The second wave of the pandemic and uncertainty around resolution of the Covid-19 pandemic continues weighing heavily on risk asset pricing in the local market. In developed markets, bullish sentiment staged a rally during the week of announcement date (9th November) of a fairly effective vaccine by Pfizer. Additionally, consideration of additional stimulus support to their economies has acted to stabilize their financial markets. The increasing sentiment in those markets has seen the price of the safe haven asset gold, steady at US$1,900 for weeks and recently indicating weakness. Since the start of the year, the yellow metal has been elevated and is reflected at the local bourse, with the Absa NewGold ETF up 42.0% in the period. On overall, positive news outpaced negative news for the general global economy though cautiousness still persists.
On the corporate end, Safaricom reported a 6% decline in half-year earnings; performance investors viewed positively with the price rising about 1% after reporting. Banking sector is expected to complete third quarter earnings announcements this month. We expect the key theme to continue from half-year announcements, where the sector increased provisioning levels substantially affecting growth in the bottom-line.
Foreign investors continue their dominance at the NSE controlling about 68% of total market activity, exiting the market to the tune of KES1.1Bn so far this quarter; cumulative net foreign sales of KES13.8Bn this year. Foreigners have remained bullish on Safaricom while holding stakes on Equity Group, EABL, KCB and BAT Kenya counters.
We continue observing cautiousness by foreign investors on all other counters likely due to their expected weaker financial performance compared to Safaricom. Local investors are more cautious, mainly investing in government securities.
