- The 20% drop is attributed to a global slowdown, ongoing geopolitical tensions in Europe and the upcoming Kenyan election.
- The bond market reported 2% growth during the period
The Nairobi Securities Exchange (NSE) continued with the losing streak in the second quarter of the year, with investments worth Sh500 billion in paper money wiped out off counters.
According to the NSE Q2 Barometer released Tuesday, the market capitalisation dropped from Sh2.4 trillion in the first three months of the year to Sh1.9 trillion.
The 20 per cent drop is attributed to a global slowdown, ongoing geopolitical tensions in Europe and the upcoming Kenyan election.
Equities market turnover was down six per cent during the quarter under review. This was evidenced by the negative performance of the three key indices.
The All Share, NSE 20 and NSE 25 indices were down 20 per cent, 13per cent and 17 per cent respectively.
The general decline in market capitalisation over the quarter was largely driven by the telecommunications sector which saw a 27 per cent drop in value from Sh1.38 trillion to approximately Sh1 trillion.
This was occasioned by a huge drop in the value of Safaricom's share accounts for at least 60 per cent of trading at the Nairobi bourse.
The telco's share which hit a high of Sh42 mid-last year dropped to a low of Sh24 during the quarter under review, having shed almost half the value.
Banking counters saw a 28 per cent drop in turnover registering Sh7.7 billion worth of trades during the quarter compared to Sh10.7 Bn in Q1.
Foreign investor participation continued to dominate market activity on a year-to-date basis, accounting for 66 per cent of trade. This impacted heavily on the stock performance in terms of investor flight and is likely to worsen as elections approach.
According to Odundo, the market is trading at an all-time low valuation of 10 times price-to-earnings ratio, making it an ideal time for investors to buy shares at discounted rates.
"Market sentiment is skewed towards a price correction in the short to medium term, and we continue to see domestic capital positioning for a market recovery post the Kenyan election cycle,'' Odundo said.
Even so, the bond market registered a turnover of Sh195 billion in Q2 which was two per cent higher than the previous quarter.
However, this was still lower than the turnover registered during the same period last year of Sh271 billion.
The total value of bonds outstanding as of June 30 stood at Sh3.3 trillion compared to Sh3.2 trillion in the first three months of the year.
Infrastructure bonds continued to be the most actively traded bond instruments during the quarter with the top three bonds taking up 31 per cent of the quarter’s turnover.
Odundo is however optimistic that the market will rebound once sanity returns in the global arena.
He cited policy reforms being implemented by various governments to tame rising inflation and stability in the global fuel prices as key catalysts.
In May, Kenya announced a 0.5 per cent increase on its base lending rate to 7.5 per cent. A similar policy has been taken by the US which raised its federal rate by 0.75 per cent mid last month.
The NSE closed the quarter positively, with all indices recording growth.
The weekly CBK Bulletin shows the NASI, NSE ,20 and NSE 25 share price indices increased by 5.2 per cent, 2.8 per cent and 6.1 per cent, respectively.
Similarly, market capitalisation and total shares traded also increased by 5.2 per cent and 5.5 per cent respectively, during the week ending June 30.
The gain has been attributed the day trading introduced late last year.
The service allows investors and speculators to make several trades in a day with the potential to make a profit from price changes.
"Previously, shares bought could not be sold on the same day and one had to wait until the transaction is cleared. Day trading now gives more options to traders and investors besides boosting liquidity in the market,'' NSE CEO Geoffrey Odundo said.
It accounts for two per cent of total trading.