The NSE( Nairobi Securities Exchange) Equities Market is sliding into a bear one if figures from the bourse are anything to go by. For instance, the NSE performance report for the period ending 17th June 2022 shows that the NSE 20-share Index closed the week lower at 1,626.81 points, a 2.97% decrease from the preceding week’s figure of 1,676.59 points.
Equally, the All-share index decreased by 6.22% to close the week at 121.81 points from the previous week’s figure of 129.89 points.
The NSE 25 Share Index decreased by 5.49% to close the week at 2,876.34 points from last week’s figure of 3,043.37 points.
Moreover, Market Capitalization closed the week at KSh 1,897.65 Billion, a 6.24% decrease from last week’s KSh 2,023.87 Billion.
According to analysts, the NSE Equities market is inching closer to bearish conditions- characterized by periods of losses in the market greater than 20%.
NSE INDICES YEAR-TO-DATE PERFORMANCE
The current NASI year-to-date performance is -24.22% (NSE-20 has lost 13.56% year-to-date), sitting deep in the bear territory.
A sizeable percentage of the listed counters are trading at all-time slumps and closer to their 52-week lows.
The market P/E valuation has been declining, trading below the 5-year historical average of 11.75x, with the current P/E standing at 6.60x. Compared to other regional markets, the NSE’s current valuation metrics point to an undervaluation on most counters.
According to analysts at AIB-AXYS.Africa.com, critical drivers of the bear run at the NSE include global factors shaping investor sentiments, election-related fears contributing to foreign investor exits and actions by the US Federal Reserve, Bank of England, ECB and Bank of Japan-which have led to an increase in bond yields in those markets, strengthening of the US Dollar and a better equities market performance.
Therefore, higher yields in developed markets have made foreigners experience a flight to safety through a sell-what-you–can strategy as they seek to enjoy the comfort of their current returns back home.
Analysts are urging local investors to buy the dip – take advantage of the foreign exits by taking up positions at the current valuations. Most of the listed counters are fundamentally sound with religious dividend payments, are pursuing growth opportunities and have historically delivered value.
With expectations of an eventual recovery, investors are advised to take up dividend-paying counters whose dividend yields are likely to cool off any negative returns already recorded.