Investors at the Nairobi Securities Exchange (NSE) are likely to make a significant gain in the coming months, according to market analysts.
The reduction of the NSE 20 share index from 5,000 in the second half of 2015 to current 3,700 —a decline of almost 34 per cent—is a major opportunity for those who want to invest in the stock market. The decline presents an opportunity to buy stocks at the NSE because they are cheap currently.
An economic slowdown in China, a sharp drop in commodity prices, unorthodox economic policies in Nigeria and questionable political leadership in South Africa have scared off all but the most patient investors.
There are bright spots in the gloom that shrouds Africa’s stock markets and believes the share prices at the NSE will soon be up.
Others include strong tea sales and recovering tourism industry that have taken downward pressure off the shilling, which helps to contain the cost of imported materials and products.
Interest rates are high but also appear relatively stable.
An insight into the pricing in Kenya’s blue chip firms indicates that the market is at a significant discount to historical averages. On some counters, it has been more than five years since the price earnings ratios were this low.
The investment returns of firms in the past one year for each of the NSE’s ten largest companies indicate that only Safaricom and Bamburi Cement increased their share value in 2015, with 10.5 per cent and 14.6 per cent respectively.
However, in spite of the market’s pessimism, the companies continued to go about their business unfazed, quietly reaping profits and creating value for their shareholders .Investors have the opportunity to pick up a shilling’s worth of earnings at price tags not seen in several years.
Author:
Theuri Paul
Investment Analyst
Note; The author’s article does not necessarily represent Kenyan Wall Street’s views.
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