The Nairobi Securities Exchange (NSE) recorded a gain of KSh 320 Billion in Capitalization at the end of Q4, 2020. This is after the equities market took a plunge to recorded a market capitalization of KSh 2.02 Trillion in March 2020 when the first COVID-19 cases were reported in Kenya.
According to the latest Capital Markets Authority (CMA) statistical bulletin, for the 4th Quarter ended December 31st, 2020, NSE recorded a Market Capitalization of KSh 2.34 Trillion.
This is compared to KSh 2.54 Trillion recorded over a similar period in 2019, indicating an overall KSh200 Billion erosion in investor networth.
Losses in NSE capitalization
“It should, however, be noted that the KSh2.34 Trillion is a KSh320 billion gain from the drop of KSh2.02 Trillion recorded at the onset of COVID-19 pandemic in March 2020, which was also the lowest monthly market capitalization,” said Luke Ombara, Director, Regulatory Policy & Strategy-CMA.
Figures indicate that with Kenya easing its lockdown measures, NSE’s market capitalization rose by KSh 209 Billion compared to the end of Q3, 2020.
The CMA bulletin also shows that the NSE-20 index closed 2020 at 1,868.39 points, a 29.6% drop from the 2,654.39 points recorded at the beginning of last year.
Drop in NSE indices
“This is because both local and foreign investors shifted their investments away from listed equity to other investments, seeking to mitigate against the declining value of their portfolios,” said Ombara.
During 2020, net foreign outflow from the bourse was KSh28.63 Billion compared to a net foreign inflow of KSh.1.38 billion in 2019, as foreign investors exited.
This CMA bulletin notes that there were some positives to be taken from the Kenyan financial sector in 2020, as the total diaspora remittances remained steady throughout the year, with the latest reported value being US$ 299 Million in December 2020.
This brings the total remittances for 2020 to just above US$ 3 Billion.
“This is a positive development in terms increasing the stock of foreign currency reserves required to service import payments and mitigate against pressure on the Kenyan shilling,” said Ombara.
Silver lining at the bourse
As expected, there was increased participation in other asset classes in the capital markets with total bond turnover totalling KSh691.83 Billion, a 6% increase from the KSh651.68 Billion recorded in 2019.
Similarly, alternative asset classes listed at the NSE such as Real Estate Investment Trusts (REITs) and Exchange Traded Funds (ETFs) recorded substantial rise inactivity.
Another notable silver lining was a steady increase in total Assets Under Management by Collective Investment Schemes to KSh98 Billion as at September 2020 compared to KSh88 Billion recorded as at June 2020, with final Q4 2020 figures are expected to surpass KSh100 billion mark.
“Outlook for 2021 remains stable going by the renewed interest in both the equity and debt capital markets in the last quarter of 2020, notably the listing by the introduction of Homeboyz Entertainment on the Growth Enterprise Market Segment (GEMS); the issuance of a corporate bond by Centum and issue of a D-REIT and I-REIT, and a number of CISes, reflecting the increasing confidence in the capital markets as a financing option in Kenya,” said Ombara.
He disclosed that CMA is keen on maintaining this level of confidence and will in 2021 focus on reviewing the existing regulatory frameworks such as Capital Markets (Collective Investment Schemes) and the Public Offers Listings and Disclosures (POLD) to make them more responsive to the issuer and investor needs.