The year has begun on a cautiously positive tone with market generally on the uptrend; activity gradually picking up following the end of the Christmas and New Year holidays. The NSE-ASI and NSE-20 are up 1.2% and 1.8%, so far this year respectively. The prospects of improvement in business environment from the depths of 2020, investors are cautiously looking at the attractive valuations in the markets although inherent risks including economic recovery, cashflow constraints and heightened political activity with the likely upcoming referendum.
So far this year, there have been notable out-performers across the market. Kenya-Re (+16.4%), Fahari I-REIT (+13.8%), Sameer Africa (+12.9%) and Flame Tree Group (+11.4%) have clocked the best returns so far in the year. On the downside are Home Afrika (-9.5%), BOC Gases (-9.1%) and Stanbic Holdings (-6.8%) YTD. Most of the key index counters are relatively at break-even with BAT Kenya and Safaricom leading at +6.9% and +2.2% YTD respectively, with the top banks, Equity, KCB and Co-operative, at +0.4%, -0.5% and +4.4% YTD respectively.
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 heavy 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 this month (February). The news of distribution of vaccines last year jolted optimism in US equities markets which clocked record highs at the tail end of the year. The local bourse barely reflected similar optimism with the marginal gains we observe so far. We note investor skewness towards Safaricom in recent weeks, clocking all-time highs as global trends favour technology stocks during the pandemic as cautiousness persists in stocks in other sectors.
Earnings season is set to begin for most companies and going by the profit warning statements so far, financial results are expected to be weak across the board. It is likely more companies will be releasing profit warnings by close of full year reporting this quarter.
Foreign investors dominated the first trading sessions of the year controlling 72.5% of total market activity, exiting the market to the tune of KES 202Mn. 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.