Investor optimism drives stock prices to year high

By James Anyanzwa

The stock market has sprung to a flurry of activity on what is attributed to positive sentiments about the country’s economic recovery, projected better half-year corporate earnings, and declining interest rates.

In addition, analysts contend that a series of Rights Issues at the Nairobi Securities Exchange in recent months have boosted market resurgence.

“I think what is happening is that the Budget Statement acted as a pointer towards higher economic growth and was received well. We are also experiencing some degree of macroeconomic stability,” said Amish Gupta, director-in-charge of investment banking at the Standard Investment Bank Ltd.

NSE listing

“There is a heightened sense of confidence by companies to raise new capital and to list by introduction and as a result the equity (shares) market is benefitting.”

Gupta reckoned that interest rates on government securities and bank deposits are stabilising and as a result local investors (both institutional and individuals) are refocusing their portfolios on the equity market away from the fixed income market.

On Wednesday, the Nairobi Securities Exchange (NSE) 20-Share Index maintained an upward trend to close at 3,739 points, after hitting a one-year high of 3,738.15 points on Wednesday. And buoyed by the sale of Equity Bank shares, turnover soared to Sh757 million on a volume of 47 million shares, up from Sh320million on 25 million shares posted the previous day.

Equity Bank was the day’s biggest mover, with 19 million shares changing hands at between Sh20.75 and Sh21.75. The bond market registered reduced activity with bonds worth Sh1.52 billion transacted compared to Sh2.12 billion posted the previous day. According to an analyst at AIB Capital, investor interest is expected to continue building in the equity market on the back of dropping yields in the bond market and the anticipated cut in Central Bank Rate in the coming or two months.

Increased interest

“Speculators are expected to take up positions on selected counters ahead of half year results,” said Ronald Lugalia, Investment analysts, AIB Capital.

According to John Kirimi, executive director at Sterling Capital, improved activity at the stock market is due to strengthening of the shilling, political stability and declining interest rates.

“Central bank is determined to keep interest rates low while political activities appear to be going fairly well,” said Kirimi. Gupta said investors are positioning themselves before companies start reporting half-year financial performance.