Safaricom pulls NSE to 12-month low

Screen showing stock prices at the Nairobi Securities Exchange. [Wilberforce Okwiri, Standard]

The value of investors’ wealth at the Nairobi Securities Exchange (NSE) today touched 12-month low, majorly pulled down by Safaricom as foreign investors sustained selling.

Market data shows investors’ paper wealth has in the last seven days of trading dropped by Sh79.91 billion with Safaricom touching levels last seen 15 months ago.

Safaricom, the most valuable stock on the NSE, Thursday dropped from Sh35.05 to Sh34.15, costing shareholders Sh36.08 billion in a day that coincided with the last day of paying its interim dividend.

“It is purely about what is happening in the global market than the company’s fundamentals,” said Kenneth Minjire, senior associate for debt and equity at AIB-AXYS Africa.

“Foreign investors, who are biggest holders of Safaricom are selling off from frontier and emerging markets and this is affecting the stock.”

The drop on the telco’s counter and the failure by other top five stocks to gain saw the NSE market capitalisation—the combined wealth of investors—close Thursday at Sh2.425 trillion.

At Sh2.425 trillion, the NSE has failed to gain value since March 22 and has dropped to a level that was last seen in April 8, 2021 when the market capitalisation was Sh2.433 trillion.

All the other four counters—Equity, KCB, East African Breweries Limited (EABL) and Cooperative Bank—, which together with Safaricom form the top five league of stocks that account for over 70 percent of NSE wealth, have also failed to impress.

Banks and other firms such as EABL have posted strong recoveries in their earnings and increased dividends to shareholders but this has not helped lift share prices.

Equity, KCB, Cooperative Bank, Absa Kenya, Standard Chartered Bank Kenya, NCBA and Stanbic have, for instance, all announced record profits and proposed record profits but their shares have hardly changed.

Equity, which ended two-year dividend drought, saw its share fall from Sh50.75 to Sh50.50 on Thursday as that of KCB dropped from Sh44.10 to Sh44. Co-op was unchanged at Sh12.85.

Mr Minjire explains that the trends in Safaricom is also mirrored in other counters that are heavily in the hands of foreigners.

“We have seen sell-off in search for safety and chase for high returns. Share prices of stocks such as banks haven’t moved much despite the strong numbers and the dividends,” said Minjire.

“Global markets have sneezed and NSE has caught flu. That is the inherent risk of NSE given the large exposure to foreign investors.”

Kenya’s situation, apart from being in frontier and emerging market, is also worsened by the election fever ahead of August general polls.

NSE investors were also rattled by Russia’s decision to invade Ukraine on February 24, leading to the shedding of Sh92.43 billion in a day.

Russian President Vladimir Putin’s action has received condemnation from countries such as the US with President Joe Biden responding with sanctions.

UN chief Antonio Guterres was quoted urging Russia to step back from an attack that could be the “worst war since the beginning of the century with consequences.”