Faida Investment Bank has advised investors to tread carefully on the Nairobi Securities Exchange (NSE), arguing that a powerful year-to-date rally has largely exhausted the upside for most major stocks.
- •In its November market outlook, the broker issued just two "Buy" recommendations, maintaining a defensive posture as it judged current valuations to be full.
- •"The easy money has been made," the report suggests, indicating that future gains will be harder won and dependent on concrete earnings delivery.
- •Faida concludes that the market's next directional move will be determined not by monetary policy tailwinds, but by the hard data of corporate earnings, inflation trends, and liquidity conditions in the coming quarters.
The firm named Co-operative Bank and KCB Group as its only preferred picks, citing their resilient fundamentals in a tightening economic environment.
Co-op Bank carries a target price of KSh 25, implying a 13% potential gain from current levels, while KCB is targeted at KSh 75, suggesting nearly 9% upside. The report highlighted both lenders' stable earnings, strong deposit bases, and advantageous scale.
The cautious outlook reflects a view that the market's recent performance, driven by improved investor sentiment and a prolonged cycle of interest rate cuts by the Central Bank, has already been priced in. Consequently, Faida placed a swath of the market's largest companies on "Hold," including Equity Group (target KSh 74.50), Safaricom (KSh 31.85), KenGen (KSh 12.05), and Kenya Power (KSh 15.50). The broker sees limited potential for these stocks to re-rate significantly higher without a fresh catalyst or stronger-than-expected financial results.
Faida also issued "Sell" ratings on three counters, setting a target of KSh 272 for Standard Chartered Bank Kenya (~13% downside), KSh 6.38 for Umeme (~18% downside), and KSh 21.00 for Absa Kenya, citing concerns over weaker earnings momentum and unattractive valuations.
The report lands as the NSE continues to trade near elevated levels.
