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- Feb 16, 2018
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NSE sheds Sh568bn investor wealth in 5 months
TUESDAY, SEPTEMBER 18, 2018 11:34
BY GEOFFREY IRUNGU
Nairobi Securities Exchange
NSE • 15.10 ▼ 0.66% (NSE) investors have lost a whopping Sh568 billion in paper wealth since April, making the past five months the toughest for East Africa’s largest bourse.
As of Monday, the market capitalisation stood at Sh2.328 trillion down from early April 5’s peak of Sh2.896 trillion – translating to a 19.6 per cent value erosion or loss of nearly a fifth of the market value in just five months.
Analysts said the decline is mainly being driven by poor corporate performance that has produced losses or steep decline in profits as well as foreign investor exits.
RELATED CONTENT
NSE billionaires now open empires to family members
Stock market investors lose Sh55bn in 6 months of share price erosion
Investor loss at NSE mounts to Sh130bn in just two sessions
Investor’s wealth rises as NSE Index closes above 5000 points
Uncertainty over the controversial interest rates on loans that were imposed two years ago also kept many investors guessing with negative impact on activity at the exchange.
“It must be said that share prices rose early this year after the International Monetary Fund (IMF) extended the standby credit facility for Kenya. The perception was that this would be followed by repeal of the interest rates cap,” said Maurice Oduor, principal officer at Cytonn Asset Management.
That, however, came a cropper after the National Assembly shot down the proposed repeal of the interest rate capping law.
The IMF extended the standby facility in March on the understanding that Kenya would repeal the rate cap and drastically cut public spending to balance its budget.
But MPs last month voted to maintain the rate cap even as they allowed commercial banks freedom to pay market-determined rates for deposits.
The IMF facility expired last Friday and Treasury secretary Henry Rotich has indicated that Kenya is not asking for an extension, because the country is in a strong foreign exchange position of nearly six months import cover.
Mr Oduor reckons that changes in the global market have more recently raised the risk profiles of emerging and frontier markets turning foreign investors into net sellers and adversely affecting the performance of the NSE.
“Foreign participation dropped, leaving a negative impact in places like Kenya, Ghana and Nigeria,” said Mr Oduor.
Johnson Nderi, the corporate investment manager at ABC Capital, said the performance of listed companies was a major factor in the ongoing erosion of investor wealth.
He said reports of falling profits and losses by listed firms would produce similar results in any market around the world.
Macroeconomic imbalances such as the current account and fiscal deficits had also contributed to the bearish run at the NSE, Mr Nderi said.
Kenya’s current account deficit has persisted as the country ships in huge amounts of imports compared to exports while the fiscal deficit has represented the extent to which the country is unable to finance its public spending from its tax resources, forcing it to borrow heavily from local and global markets.
“The strengthening of the dollar globally has put pressure on foreign investments. Foreigners are selling because they realise that if they stay any longer, they will lose in both foreign exchange and share price terms,” said Mr Nderi.
The foreigners appear to be reasoning that even if corporate performance improved but the dollar continued to strengthen, they would remain in a loss-making position hence the quest to sell and exit.
Mr Oduor, however, argued that for local investors current share prices offer an opportunity to buy and ride the wave of a rising tide in the future.
He noted that the current P/E level of 13.4 per cent for the NSE as a whole represented a historically low level on a 10-year basis.
“This is a time to buy because shares are cheap on a historical basis. Bank shares, for example, are undervalued. It is just a matter of time before people realise that there is still quite a lot of money to be made by getting into the market,” said Mr Oduor.
In year-to-date terms, the counters whose share prices have fallen by the biggest margins include Deacons East Africa, Uchumi Supermarkets, Athi River Mining, Home Afrika, Eveready East Africa and Kenya Airways. Those that have gained, despite the general decline in market prices of most other stocks, include Kapchorua Tea, Express Kenya, Unga and Stanbic Holdings.
NSE sheds Sh568bn investor wealth in 5 months
TUESDAY, SEPTEMBER 18, 2018 11:34
BY GEOFFREY IRUNGU
Nairobi Securities Exchange
NSE • 15.10 ▼ 0.66% (NSE) investors have lost a whopping Sh568 billion in paper wealth since April, making the past five months the toughest for East Africa’s largest bourse.
As of Monday, the market capitalisation stood at Sh2.328 trillion down from early April 5’s peak of Sh2.896 trillion – translating to a 19.6 per cent value erosion or loss of nearly a fifth of the market value in just five months.
Analysts said the decline is mainly being driven by poor corporate performance that has produced losses or steep decline in profits as well as foreign investor exits.
RELATED CONTENT
NSE billionaires now open empires to family members
Stock market investors lose Sh55bn in 6 months of share price erosion
Investor loss at NSE mounts to Sh130bn in just two sessions
Investor’s wealth rises as NSE Index closes above 5000 points
Uncertainty over the controversial interest rates on loans that were imposed two years ago also kept many investors guessing with negative impact on activity at the exchange.
“It must be said that share prices rose early this year after the International Monetary Fund (IMF) extended the standby credit facility for Kenya. The perception was that this would be followed by repeal of the interest rates cap,” said Maurice Oduor, principal officer at Cytonn Asset Management.
That, however, came a cropper after the National Assembly shot down the proposed repeal of the interest rate capping law.
The IMF extended the standby facility in March on the understanding that Kenya would repeal the rate cap and drastically cut public spending to balance its budget.
But MPs last month voted to maintain the rate cap even as they allowed commercial banks freedom to pay market-determined rates for deposits.
The IMF facility expired last Friday and Treasury secretary Henry Rotich has indicated that Kenya is not asking for an extension, because the country is in a strong foreign exchange position of nearly six months import cover.
Mr Oduor reckons that changes in the global market have more recently raised the risk profiles of emerging and frontier markets turning foreign investors into net sellers and adversely affecting the performance of the NSE.
“Foreign participation dropped, leaving a negative impact in places like Kenya, Ghana and Nigeria,” said Mr Oduor.
Johnson Nderi, the corporate investment manager at ABC Capital, said the performance of listed companies was a major factor in the ongoing erosion of investor wealth.
He said reports of falling profits and losses by listed firms would produce similar results in any market around the world.
Macroeconomic imbalances such as the current account and fiscal deficits had also contributed to the bearish run at the NSE, Mr Nderi said.
Kenya’s current account deficit has persisted as the country ships in huge amounts of imports compared to exports while the fiscal deficit has represented the extent to which the country is unable to finance its public spending from its tax resources, forcing it to borrow heavily from local and global markets.
“The strengthening of the dollar globally has put pressure on foreign investments. Foreigners are selling because they realise that if they stay any longer, they will lose in both foreign exchange and share price terms,” said Mr Nderi.
The foreigners appear to be reasoning that even if corporate performance improved but the dollar continued to strengthen, they would remain in a loss-making position hence the quest to sell and exit.
Mr Oduor, however, argued that for local investors current share prices offer an opportunity to buy and ride the wave of a rising tide in the future.
He noted that the current P/E level of 13.4 per cent for the NSE as a whole represented a historically low level on a 10-year basis.
“This is a time to buy because shares are cheap on a historical basis. Bank shares, for example, are undervalued. It is just a matter of time before people realise that there is still quite a lot of money to be made by getting into the market,” said Mr Oduor.
In year-to-date terms, the counters whose share prices have fallen by the biggest margins include Deacons East Africa, Uchumi Supermarkets, Athi River Mining, Home Afrika, Eveready East Africa and Kenya Airways. Those that have gained, despite the general decline in market prices of most other stocks, include Kapchorua Tea, Express Kenya, Unga and Stanbic Holdings.
MY TAKE:
Investors are Leaving Nairobi Stock Exchange. Capital Flight is Real!
TUESDAY, SEPTEMBER 18, 2018 11:34
BY GEOFFREY IRUNGU
Nairobi Securities Exchange
NSE • 15.10 ▼ 0.66% (NSE) investors have lost a whopping Sh568 billion in paper wealth since April, making the past five months the toughest for East Africa’s largest bourse.
As of Monday, the market capitalisation stood at Sh2.328 trillion down from early April 5’s peak of Sh2.896 trillion – translating to a 19.6 per cent value erosion or loss of nearly a fifth of the market value in just five months.
Analysts said the decline is mainly being driven by poor corporate performance that has produced losses or steep decline in profits as well as foreign investor exits.
RELATED CONTENT
NSE billionaires now open empires to family members
Stock market investors lose Sh55bn in 6 months of share price erosion
Investor loss at NSE mounts to Sh130bn in just two sessions
Investor’s wealth rises as NSE Index closes above 5000 points
Uncertainty over the controversial interest rates on loans that were imposed two years ago also kept many investors guessing with negative impact on activity at the exchange.
“It must be said that share prices rose early this year after the International Monetary Fund (IMF) extended the standby credit facility for Kenya. The perception was that this would be followed by repeal of the interest rates cap,” said Maurice Oduor, principal officer at Cytonn Asset Management.
That, however, came a cropper after the National Assembly shot down the proposed repeal of the interest rate capping law.
The IMF extended the standby facility in March on the understanding that Kenya would repeal the rate cap and drastically cut public spending to balance its budget.
But MPs last month voted to maintain the rate cap even as they allowed commercial banks freedom to pay market-determined rates for deposits.
The IMF facility expired last Friday and Treasury secretary Henry Rotich has indicated that Kenya is not asking for an extension, because the country is in a strong foreign exchange position of nearly six months import cover.
Mr Oduor reckons that changes in the global market have more recently raised the risk profiles of emerging and frontier markets turning foreign investors into net sellers and adversely affecting the performance of the NSE.
“Foreign participation dropped, leaving a negative impact in places like Kenya, Ghana and Nigeria,” said Mr Oduor.
Johnson Nderi, the corporate investment manager at ABC Capital, said the performance of listed companies was a major factor in the ongoing erosion of investor wealth.
He said reports of falling profits and losses by listed firms would produce similar results in any market around the world.
Macroeconomic imbalances such as the current account and fiscal deficits had also contributed to the bearish run at the NSE, Mr Nderi said.
Kenya’s current account deficit has persisted as the country ships in huge amounts of imports compared to exports while the fiscal deficit has represented the extent to which the country is unable to finance its public spending from its tax resources, forcing it to borrow heavily from local and global markets.
“The strengthening of the dollar globally has put pressure on foreign investments. Foreigners are selling because they realise that if they stay any longer, they will lose in both foreign exchange and share price terms,” said Mr Nderi.
The foreigners appear to be reasoning that even if corporate performance improved but the dollar continued to strengthen, they would remain in a loss-making position hence the quest to sell and exit.
Mr Oduor, however, argued that for local investors current share prices offer an opportunity to buy and ride the wave of a rising tide in the future.
He noted that the current P/E level of 13.4 per cent for the NSE as a whole represented a historically low level on a 10-year basis.
“This is a time to buy because shares are cheap on a historical basis. Bank shares, for example, are undervalued. It is just a matter of time before people realise that there is still quite a lot of money to be made by getting into the market,” said Mr Oduor.
In year-to-date terms, the counters whose share prices have fallen by the biggest margins include Deacons East Africa, Uchumi Supermarkets, Athi River Mining, Home Afrika, Eveready East Africa and Kenya Airways. Those that have gained, despite the general decline in market prices of most other stocks, include Kapchorua Tea, Express Kenya, Unga and Stanbic Holdings.
NSE sheds Sh568bn investor wealth in 5 months
TUESDAY, SEPTEMBER 18, 2018 11:34
BY GEOFFREY IRUNGU
Nairobi Securities Exchange
NSE • 15.10 ▼ 0.66% (NSE) investors have lost a whopping Sh568 billion in paper wealth since April, making the past five months the toughest for East Africa’s largest bourse.
As of Monday, the market capitalisation stood at Sh2.328 trillion down from early April 5’s peak of Sh2.896 trillion – translating to a 19.6 per cent value erosion or loss of nearly a fifth of the market value in just five months.
Analysts said the decline is mainly being driven by poor corporate performance that has produced losses or steep decline in profits as well as foreign investor exits.
RELATED CONTENT
NSE billionaires now open empires to family members
Stock market investors lose Sh55bn in 6 months of share price erosion
Investor loss at NSE mounts to Sh130bn in just two sessions
Investor’s wealth rises as NSE Index closes above 5000 points
Uncertainty over the controversial interest rates on loans that were imposed two years ago also kept many investors guessing with negative impact on activity at the exchange.
“It must be said that share prices rose early this year after the International Monetary Fund (IMF) extended the standby credit facility for Kenya. The perception was that this would be followed by repeal of the interest rates cap,” said Maurice Oduor, principal officer at Cytonn Asset Management.
That, however, came a cropper after the National Assembly shot down the proposed repeal of the interest rate capping law.
The IMF extended the standby facility in March on the understanding that Kenya would repeal the rate cap and drastically cut public spending to balance its budget.
But MPs last month voted to maintain the rate cap even as they allowed commercial banks freedom to pay market-determined rates for deposits.
The IMF facility expired last Friday and Treasury secretary Henry Rotich has indicated that Kenya is not asking for an extension, because the country is in a strong foreign exchange position of nearly six months import cover.
Mr Oduor reckons that changes in the global market have more recently raised the risk profiles of emerging and frontier markets turning foreign investors into net sellers and adversely affecting the performance of the NSE.
“Foreign participation dropped, leaving a negative impact in places like Kenya, Ghana and Nigeria,” said Mr Oduor.
Johnson Nderi, the corporate investment manager at ABC Capital, said the performance of listed companies was a major factor in the ongoing erosion of investor wealth.
He said reports of falling profits and losses by listed firms would produce similar results in any market around the world.
Macroeconomic imbalances such as the current account and fiscal deficits had also contributed to the bearish run at the NSE, Mr Nderi said.
Kenya’s current account deficit has persisted as the country ships in huge amounts of imports compared to exports while the fiscal deficit has represented the extent to which the country is unable to finance its public spending from its tax resources, forcing it to borrow heavily from local and global markets.
“The strengthening of the dollar globally has put pressure on foreign investments. Foreigners are selling because they realise that if they stay any longer, they will lose in both foreign exchange and share price terms,” said Mr Nderi.
The foreigners appear to be reasoning that even if corporate performance improved but the dollar continued to strengthen, they would remain in a loss-making position hence the quest to sell and exit.
Mr Oduor, however, argued that for local investors current share prices offer an opportunity to buy and ride the wave of a rising tide in the future.
He noted that the current P/E level of 13.4 per cent for the NSE as a whole represented a historically low level on a 10-year basis.
“This is a time to buy because shares are cheap on a historical basis. Bank shares, for example, are undervalued. It is just a matter of time before people realise that there is still quite a lot of money to be made by getting into the market,” said Mr Oduor.
In year-to-date terms, the counters whose share prices have fallen by the biggest margins include Deacons East Africa, Uchumi Supermarkets, Athi River Mining, Home Afrika, Eveready East Africa and Kenya Airways. Those that have gained, despite the general decline in market prices of most other stocks, include Kapchorua Tea, Express Kenya, Unga and Stanbic Holdings.
MY TAKE:
Investors are Leaving Nairobi Stock Exchange. Capital Flight is Real!
