Investors lose Sh530b in 7 months as foreigners pull cash out of NSE

Investors at the Nairobi bourse have lost another Sh60 billion in the last one month, extending the losses to Sh530 billion since prices of shares started falling seven months ago.

Nairobi Securities Exchange trading floor. [PHOTO: BEVERLYNE MUSILI/STANDARD]

Latest data from the Nairobi Securities Exchange (NSE), show that market capitalisation—the market value of all outstanding shares -- has shrunk by 20 per cent from Sh2.43 trillion in March to Sh1.90 trillion by the end of Friday.

The losses have now wiped out 50 per cent of value of at least three companies listed on the NSE, bruised by a volatile Kenyan currency, inflation and high interest rate regime.

Cement firm Athi River Mining (ARM) is the worst hit having lost 59 per cent of its value. This means that a shareholder in the cement firm has lost Sh59 since March for every Sh100 worth of shares in the company.

Advertising giant WPP ScanGroup is the second biggest loser, shedding off 52 per cent of its value, followed by British American Investments Company (Britam) which announced a 77 per cent drop in profits last month has half of its value eroded.

Athi River Mining has lost Sh25 billion of the stock value, while WPP ScanGroup has shed Sh10 billion and Britam (Sh28 billion).

Other big losers are the Nation Media Group and Kenya Airways to complete the list of top five among the top 20 companies at the bourse by market size, that make up the NSE-20 Share Index.

March was the peak of this year’s performance. Since then, it has been on a downward trend, leaving investors poorer. This has seen some scramble to exit the market in net sales that have further put pressure on the stock market.

An analysis of the losses shows that shareholders in the top 20 companies classified under the NSE 20 Share Index have borne the biggest brunt of the bear market, a condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment.

Wiped off

The dip has wiped off about Sh435 billion from the top 20 companies among them the blue chips like Safaricom, Equity Bank and Kenya Commercial Bank (KCB).

KCB, Safaricom and Standard Chartered Bank have shed off the biggest values cumulatively, with the market capitalisation shrinking by Sh52 billion since March, Safaricom by Sh50 billion and Stanchart by Sh48 billion.

This has seen analysts remain pessimistic on the returns at the NSE in what is likely to reduce options for investors who want to put money in the stock market.

“We remain neutral with a negative bias on equities given the significantly lower earnings growth prospects for this year. The market is now purely a stock pickers’ market, with few pockets of value,” analysts at Cytonn said in its weekly report to investors.

Britam attributed the losses to its exposure on the stock market made it book unrealised losses of Sh843 million in the first half of the year ending June 2015. This compares to the Sh2.8 billion it earned in a similar period in 2014.

“The decrease in our profits is a result of the downturn performance of the securities market, which impacted negatively on the fair value gains from the financial assets. This down turn also affected other blue chip companies listed in the Nairobi Securities Exchange,” the firm’s Managing Director Benson Wairegi told an investor briefing recently.

Its exposure is mainly due to its stake in Equity Bank and Mortgage firm Housing Finance where it is the single largest institutional investor.

The sinking of Kenya Airways into a Sh25.7 billion record loss also hurt the share price of the national carrier, coming in as the fifth biggest loser in market capitalisation.

These losses are likely to have a bearing on the economic growth of the country this year as well as reduce the number of jobs created.

Analysts have described the situation as dire, attributing the losses to a stronger US economy that has seen investors take off from the Kenyan market. “We have never had anything like this. What is happening can be explained in two ways. One is the general performance of the economy, high interest rates and a collapsing economy,” Johnson Nderi, a manager corporate Finance and Advisory at ABC Capital Limited told Weekend Business.

“But this is the first time that the performance is linked to the profits of companies. Companies have not been doing so well in the period,” Mr Nderi added. Other factors are price correction and the capital gains tax.

Analysts at Standard Investment Bank (SIB) say that investors are now turning to T-Bills that are offering a more decent return as investors now shift to guaranteed return from debt instruments. Returns look promising. At last week’s sale, the weighted average yield on 91-day Treasury bills rose to 22.133 percent from 21.353 percent last week, while that on the 182-day bill jumped to 21.840 percent from 21.607 percent last week. The yield on the 364-day Treasury bills rose to 21.882 percent from 21.498 percent last week.

And the raising of interest rates in the US has also seen investors pulling out of emerging markets.

Only Sasini Limited, an agricultural firm has shrugged off the market turbulence to grow their value on the NSE among the top 20 companies.

Bear run

The firm’s market capitalisation has grown by 5 per cent to Sh3.7 billion, from the Sh3.5 billion. But this gain also reducing given that it had a market capitalisation of Sh4 billion last month. The bear run at the stock market is estimated to have cost about 14 Kenyan billionaires Sh20 billion of their wealth on paper since the beginning of the year, with most of their stock holdings recording double-digit declines.

The performance mirrors the difficult operating environment in the first half of the year in which half of the 32 listed firms have reported slowdown in profits or even sunk into losses.

Transportation and warehousing firm, Express Kenya, warned of a significant drop in earnings, crowning a disastrous run for big Kenyan firms so far this year. Transcentury reported a Sh676 million loss that the management attributed partly to devaluation of the shilling, which led to increased finance costs.

Transcentury was also exposed to the plant upgrade of East African Cables’ copper factory in Nairobi, where it has a controlling stake.

EA Cables has also issued a profit warning citing the impact of the reduced production as a result of the plant upgrade that was compounded by foreign exchange losses.