A cautiously positive tone that opened the year was sustained during the month with the market generally on the uptrend and market activity steadily picking up. The NSE-All Share Index and NSE-20 has edged up 4.3% and 0.9%, respectively, so far this year.
Prospects for improvement in business environment from the depths of 2020 are looking up with private sector activity as per data from the Stanbic Purchasing Managers Index (PMI) indicating an expansion in private sector activity during the month. With the optimism, investors are cautiously looking at the attractive valuations in the markets although inherent risks persist including economic recovery, cashflow constraints and heightened political activity with the likely upcoming referendum.
Against the norm, blue chips are out-performers across the market so far this year. BAT Kenya (+16.3%), EABL (+15.1%), Safaricom (+10.4%) and Bamburi Cement (+9.6%) with a lone penny stock in the top gainers for the year (Nairobi Business Ventures at 17.8%). On the downside are Home Afrika (-16.7%), Standard Group Plc (-15.6%) and Sanlam Kenya (-12.7%) YTD. Most of the key banking sector counters are relatively at break-even so far this year, with Equity Group leading at +2.6%; KCB Group at -1.6%; and COOP Bank at 0.4%.
Concerns about the pandemic especially with new fast spreading mutations, heightened political activity and uncertainty around the shape of business and economic recovery continues weighing heavily on risk asset pricing in the local market. The distribution of vaccines is off to a slow start especially in the developed countries while locally, news flow indicate vaccines will be available later this month than as previously indicated. On overall, we are seeing cautiousness across the market as investors weigh in on the shape and duration of business recovery across the different economic sectors. Investor skewness towards tech stocks and locally on Safaricom has driven the stock to all-time highs (KES38.00) on stream of positive innovative news and an interim dividend announced.
Earnings season is set to continue for majority of companies. EABL noted strong recovery in the second half of last year (sales rose 53% compared to Jan–Jun 2020 period, which was heavily affected by pandemic-related lockdowns and restrictions) while KenGen released strong financial results on capacity additions and offered a cash dividend.
Foreign investors dominated the first trading sessions of the year controlling 65.2% of total market activity, exiting the market to the tune of KES309Mn. Key counters by foreigners have been Safaricom, Equity Group, EABL, KCB and BAT Kenya, sustaining bullishness 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.