‘Big 5’ firms call the shots at NSE

The Capital Markets Authority (CMA) has expressed concern over the overwhelming dominance of five of the country’s top firms at the bourse.

The regulator in a new report released yesterday said five companies accounted for two-thirds of the total market capitalisation at the Nairobi Securities Exchange (NSE) in the three months to March, exposing the stock market to concentration risk.

The combined market capitalisation of the stocks of Safaricom, East African Breweries, Kenya Commercial Bank (KCB), Equity Bank and British American Tobacco (BAT), the Capital Markets Soundness Report showed, accounted for about 64 per cent of the market capitalisation.

“The top five companies accounted for between 63.7 per cent and 65 per cent of the market capitalisation, which is a heavy level of concentration on a few counters and exposes the market to concentration risks,” said CMA Chief Executive Paul Muthaura during the the report’s launch in Nairobi.

There are 67 companies listed at the NSE. The Capital Markets Soundness Report is a publication on capital markets stability indicators and industry risks.

According to the report, the market capitalisation stood at Sh1.89 trillion as at March this year, an 8.85 per cent decline compared to Sh2.07 trillion in the first quarter of last year.

 Blue chip companies

In terms of listed company performance, overall, the top five companies’ market capitalisation accounted for an average of 64.85 per cent, 64.96 per cent and 63.70 per cent of the total market capitalisation in the months of January, February and March respectively.

“This further confirms the dominance of blue chip companies like Safaricom, East African Breweries, Kenya Commercial Bank, Equity Bank and British-American Tobacco in the performance of the Kenyan market,” said the report.

The report by CMA noted that Safaricom had the highest market concentration, accounting for 38.07 per cent of total market capitalisation as at March 31.

Mr Muthaura said CMA has been advocating for privatisation of state entities through listing at NSE in a bid to grow the investment opportunities available in the market for investors and deal with the concentration risk.