NSE sinks to 10-year low as bank profits, dividends rise

Share prices of Safaricom and major banks including Equity and KCB have seen sustained price declines despite record earnings and profits, lifting the combined wealth of Nairobi Stock Exchange (NSE) investors to levels last seen 10 years ago.

Market data shows paper investor wealth reached Sh1.604 trillion on Friday and recovered slightly by Sh8.5 billion to close on Monday at Sh1.613 trillion, keeping the NSE near the level seen in the week ending July 25, 2013, when the market hit Sh1.432 trillion. .

Safaricom, KCB, Equity, Co-op Bank and East African Breweries (EABL), which account for 68.3 percent of total market capitalization, shed Sh142.31 billion in the past four weeks, sending the NSE stock exchange into a tailspin.

The announcement of an interim dividend of Sh23.42 billion, which was paid on March 31, failed to lift the telecoms shareholder which closed on Monday at Sh15.95, down from Sh24.15 at the end of December.

Nine top-tier lenders — Equity, KCB, Coop Bank, NCBA, DTB, Stanbic Bank, Absa Bank, StanChart and I&M — suffered a similar fate despite their combined dividend payments increasing by 22 per cent to Sh63.07 billion in dividends. Net for last year rose 25.2 percent to Sh176.86 billion.

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Analysts say the decline in share prices despite earnings and dividend growth is due to foreign investors continuing to sell their shares for attractive returns in developed markets such as the United States and retail investors’ response to panic sales, which further lowered prices.

There has been a general apathy of local high-net-worth individuals and retail investors, which has caused prices to drop, said Kenneth Mengere, senior associate, debt and equity at AIB-AXYS Africa.

“Despite good earnings, buyers are few. Retail investors have been really selling, and there are not enough volumes outside to support prices even though there are good financial results,” Minjire said.

“As long as the carriers stay overseas, our domestic revenues can’t support our market. When overseas investors go out, it’s like saying 50-60 percent of our market isn’t trading.”

A weak shilling, dollar shortage, geopolitical concerns about the continuation of the conflict between Russia and Ukraine, and spiraling inflation that has forced record interest rate hikes in Western markets such as the United States, also contributed to capital flight from the New York Stock Exchange.

More price falls are expected in the coming days as at least 22 NSE companies including Jubilee, Equity, BAT, Stanbic and KCB closed their books between this month and the end of July to pay dividends.

Between April 6 and Monday, Safaricom took Sh106.17 billion to account for the bulk of the NSE’s decline over the past four weeks.

In the last four weeks EABL and KCB each lost Sh17.2 billion and Sh15.1 billion respectively. Equity decreased by Sh2.08 billion while the value of the Co-operative Bank decreased by Sh1.76 billion.

The EABL stake subsided after Diageo’s offer to buy 118.39 million EABL shares at Sh192 each, representing a premium of 39 percent, expired.

Retail investors would normally be expected to be attracted to discounted stock prices when foreigners retreat but this has not happened, leaving trade volumes low and further depressing prices due to oversupply.

“There are many retail investors who are having a hard time economically, and so they have cashed in their stocks because they see the prices falling, which affects the prices more,” Minjire said.

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NSE data shows share trading volume of Sh4.22 billion last month, down from Sh32.4 billion the previous month and marking one of the lowest turnovers in a single month.

Analysis of pension plans by the Actuarial Service for East Africa (Actserv) shows that the contraction in the NSE saw negative returns for equity retirees from 4.8% in the first quarter of last year to 7.2% in the three-month period. March is over.

“The decline in local stocks was attributed to the outflow of foreign investors following dollar liquidity constraints and the high interest rate environment in developed markets,” said Akserve.

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