Kenyan Blue Chips Hammered: ‘The Barometer’ says it All.

Market Insights

Dear Market Participant,

It has come to our attention that we need to give an update on the current state of the Kenyan Equity Markets. We are currently reflecting on the words of Jim Rogers a legendary investor and co-founder of the Quantum Fund, he says that

“Bottoms in the investment world don’t end with four-year lows; they end with 10- or 15-year lows.”

Rogers words may not necessarily be applicable, however, taking that idea in mind we charted out a 10 year NSE 20 Index Chart.

The NSE 20 Index is a price weight index calculated as a mean of the shares of 20 public, listed companies. They are selected based on a weighted market performance during the period under review based on the following criteria:

  1. Trading activity measures i.e. market capitalization, shares traded, deals/liquidity and turnover during the period under review are weighed in the ratio of 4:3:2:1 respectively.
  2. A company must have a free float of at least 20%
  3. Must have a minimum market capitalization of KES 20 Million
  4. A company should ideally be a blue chip with superior profitability and dividend record.

NSE 20 Share Index constituent companies are currently as follows:

  • Sasini Ltd
  • Barclays Bank of Kenya Ltd
  • CFC Stanbic of Kenya Holdings Ltd
  • Diamond Trust Bank Kenya Ltd
  • Equity Bank Ltd
  • Kenya Commercial Bank Ltd
  • The Co-operative Bank of Kenya Ltd
  • Nation Media Group Ltd
  • Scangroup Ltd
  • ARM Cement Ltd
  • Bamburi Cement Ltd
  • KenGen Co. Ltd
  • KenolKobil Ltd
  • Kenya Power & Lighting Co Ltd
  • British-American Investments Co.(Kenya) Ltd
  • CIC Insurance Group Ltd
  • Centum Investment Co Ltd
  • British American Tobacco Kenya Ltd
  • East African Breweries Ltd
  • Safaricom Ltd

The NSE 20 Index is currently hovering slightly above 3,500 level. Looking at the 10 year NSE 20 Index chart below undoubtedly we are facing a market correction/bear market/ recession or a down market, basically call it what you want the fact is that the market is not performing well.

A few takeaway notes and observations are that:

  • For the past 10 Years we have had 3 classic bear markets in 2008/09, 2011/12 and the current one from 2015 to date.
  • The current market correction ranks 2nd after the 2008/09 bear market with the market currently down by 35.74% since its peak in 2015.
  • We are currently roughly 369 points away from the 2012 low and slightly over 1,000 points away from the severe 2008/09 crash.
  • An interesting point is that the current market correction has taken longer to recover than the previous two experienced in the last 10 years. 2008/09 crash lasted 307 days, 2011/12 correction lasted 396 days and the current correction has lasted for 515 days already and we do not know how much longer it will take till it rebounds.

We now take a closer look at the blue chip (NSE 20) companies’ performance year-to-date. In the charts below:

The best performers year-to-date are only 5 counters i.e. Kenol Kobil, BAT Kenya, Safaricom, Sasini Tea and CFC Stanbic with a slight 1% uptick.

Kenol Kobil
Kenol Kobil Share Price

 

British American Tobacco Kenya
British American Tobacco Kenya Share Price
Safaricom Share Price
Safaricom Share Price

The worst performing counters on the NSE 20 Index year-to-date are led by Kenya Power & Lighting Company, Nation Media Group, and ScanGroup. To put it into context, ten companies out of the twenty companies in the NSE 20 Index are experiencing double digit percentage losses.

Kenya Power & Lighting Company Share Price
Kenya Power & Lighting Company Share Price
Nation Media Group Share Price
Nation Media Group Share Price
WPP Scan Group Share Price
WPP Scan Group Share Price

Conclusion
This are tough times for our so called ‘blue chip’ companies. Deeper analysis is required as you place your bets and we believe as the turmoil ensues longer term investors may be able to acquire some valuable investments at significant discounts.
As always the team here wishes you great out-performance in your portfolios.

Source: (Kenyan WallStreet, Financial Times, NSE)

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