As 2020 finally crawled to a close, uncertainty still overhangs the general market with recent quarters recording subdued market activity and marginal price movements on majority of key index counters. This entrenches 2020’s bearish sentiment with both the NSE All Share Index and NSE 20 Share Index down 11.6% and 32.4% year-to-date (YTD), respectively. Despite the improvement in business environment from the steep dip of 2Q20, markets are now grappling with inherent risks of slower economic recovery, the second wave of the Covid-19 pandemic and heightened political activity heading into 2021.
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So far during the year just ended, there have been notable out-performers across the market. Carbacid Investments (+47.5%), Kenya Airways (+46.3%) and Absa NewGold Exchange Traded Fund, ETF (+30.8%) gave investors the best returns during the year. Both Carbacid and Kenya Airways rallied on significant corporate action announcements while the ETF rose on flight-to-safety strategies by investors during the year. Most of the key index counters are in negative territory (except Safaricom which has recouped its earlier price erosion, 4.6% YTD) with the key banks (Equity, KCB and COOP) sharply lower, on average by 31.5% YTD while EABL and BAT Kenya have both retreated 22.0% YTD.
The second wave of the pandemic, heightened political activity and uncertainty around the shape of business and economic recovery continues weighing heavy on risk asset pricing in the local market. News of final approvals and the beginning of distribution of vaccines across the world gave a jolt of optimism in US equities markets which clocked record high levels in December. The local bourse has barely reflected similar optimism with the NASI and NSE-20 up 5.2% and down 3.1%, respectively in the quarter. However, we noted investor skewness towards Safaricom which has gained 10.9% and clocked record highs during the quarter just ended. Overall, we observe that positive news favours the tech stocks as cautiousness persists on other stocks.
November marked close of reporting period for most companies with weak financial results across the board. Additionally, companies continue releasing profit warning statements in regard to the year’s financial results and expect more companies will be releasing profit warnings ahead of full year results release by April 2021.
Foreign investors continue their dominance at the NSE controlling about 68% of total market activity, exiting the market to the tune of KES 1.1Bn so far this past quarter, cumulating total net foreign sale of KES 13.7Bn this year. Key counters by foreigners have been Safaricom, Equity Group, EABL, KCB and BAT Kenya, remaining bullish on Safaricom. 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.
