“I do not play according to a given set of rules; I look for changes in the rules of the game.” – George Soros
We have come to the dawn of a new month (April), the first quarter of 2017 was quite challenging as we saw the market tumble to as low as 2,789.64 points in January (NSE 20 index). The market later recovered steadily to cut back its losses and ended the first quarter 112.52 points above the 3,000 mark. Undoubtedly, investors on the NSE are currently undergoing severe emotional battles trying to figure out where the True North is! The question then lies what investment style will lead to overall market out-performance considering that we are deep in a bear market that began in 2015 and is arguably the longest bear run experienced in the last decade.
The current market set-up boils down to asset allocation which arguably will produce 80 percent of portfolio results, stock selection and other factors will only account for 20 percent. The rules of the game have changed and an investor needs to be more dynamic in his dealings and pay much closer attention on the inflection points and act accordingly.
Let us now look deeper to how the market performed in the quarter:
The Nairobi All Share index closed the quarter at 130.51 points this is 1.58 percent down since the year began. The benchmark NSE 20 share index was also down by 2.92 percent to close March at 3,112.52 points compared to the start of the year.
In the first quarter of 2017 the number of total deals executed dropped by roughly 26% compared to the the previous quarter in 2016.
Some counters made decent recoveries while the rest are still depressed and hovering around their 52 week lows.
Top 10 Gainers Q1 2017
|Company||3 Jan. 2017 VWAP||31 March, 2017 VWAP||% Gain||Shares Traded|
|6.||Standard Chartered Bank||188.00||215.00||+14.36||1,195,600|
Agricultural listed company Sasini Tea emerged as the top performer in the first quarter of the year with the share price going up by 30.65 percent on the back of 2 million shares traded. Sasini Tea recently sold over 500 acres in Nyeri and is seeking to diversify its revenue stream in the Macademia business. Its net profits for FY16 was down by 30%.
Total Kenya a downstream oil marketer in Kenya had a good 20.23 percent share price rally in Q1 2017. The company recently completed a 76% acquisition in Gulf Africa Petroleum’s (GAPCO) assets in Kenya, Uganda and Tanzania. The oil company also had a good 2016 financial year with it’s net profits up by an impressive 38% to stand at Ksh 2.2 billion. Total Outre – Mer owns 92% of the company.
Kenyan tier 1 bank KCB Group had a fair share price action in the quarter with it’s share price going up by 19.83 percent. The bank made a surprise 50% increase in its dividends to Ksh 3.00 per share amidst the current headwinds in the banking industry due to interest rate capping laws made by the government. The total dividend payout comes to Ksh 9.1 billion. A total of 120 million shares were traded in the quarter representing a 3.9% of the total outstanding shares in the bank.
Top 10 Losers Q1 2017
|Company||3 Jan. 2017 VWAP||31 March, 2017 VWAP||% Loss||Shares Traded|
|2.||Car & General||27.00||18.00||-33.33||20,400|
|8.||Kenya Power (KPLC)||8.00||6.45||-19.38||21,749,700|
Losers still dominated the market generally and were led at the forefront by Kenyan retailer Uchumi Supermarkets which saw its share price plummet by 37 percent from Ksh 3.75 to Ksh 2.35 per share in the quarter. We maxed out Uchumi’s share price and from the data its share price has sunk by almost a jaw dropping 94 percent since 1995 to date.
Mumias Sugar company was another victim in the quarter and saw its share price falling by 24 percent. The company announced that it will shut down operations for the next 3 months in order to undertake maintenance and repairs of the factory equipment’s.
Kenyan Insurance company Britam’s share price was down by 18.25 percent in the quarter. 26.4 million shares were traded in the quarter. Overall all six listed insurance companies were down in the quarter with Jubilee Insurance remaining as the only fairly resilient counter down by almost a percentage point.
As the quarter came to a close NewGold ETF listed 400,000 gold bullion debentures on the Nairobi Securities Exchange. Barclays Financial Services Limited will be the sole market maker. Kenyan investors are now able to diversify their investment portfolios by getting an exposure towards Gold as an asset class. The ETF is shariah compliant.
In the first week of trading 1,100 units were traded.
Fixed Income Market
Corporate Bond Market
In Q1 2017 listed company East African Breweries Limited went into the the debt markets and sought for Ksh 6 billion as the second and final tranche of its medium term note program. The paper was oversubscribed by 41 percent. Bids came in at Ksh 8.45 billion for the Ksh 6 billion on offer. The company says the funds will be used in restructuring their balance sheet. The bond has a coupon of 14.17 percent.
Government Treasury Bills
The government of Kenya launched a pilot version of the long awaited M-Akiba Bond, a treasury bond that is traded through mobile phones, making it the first country in the world to launch this initiative to the public making retail investors to invest as low as Ksh 3,000 in this bonds. The government is targeting to raise Ksh 150 million in this issue and the paper offers a coupon of 10% for a three year period. The proceeds of the bond are to be utilized in infrastructure projects.
Domestic Bond Stats
Debt Market Statistics Q1 2017
|Number of deals||589||999||903|
|Bond Turnover (KES)||28,316,632,225||30,626,479,625||45,992,949,800|
Kenyan Sovereign Bonds
|Security||Price (24 March 2017)||Yield||Spread|
|KENINT 5 ⅞ 06/24/19||104||3.9||267|
|KENINT 6 ⅞ 06/24/24||100||6.9||451|
We wish our readers great portfolio out-performance.
Sources: (Kenyan Wall Street, NSE, FT)