This archive report was first published on 27 September 2021.
As Kenya's economy recovers from the pandemic-induced slump, more than half of stock prices at the Nairobi Securities Exchange (NSE) have yet to return to their pre-Covid-19 levels.
According to data, 31 out of 58 actively traded counters are trading below their closing price on March 12, 2020, when Kenya announced the first case of Covid-19.
Despite this, the combined wealth of investors at the NSE grew Sh610 billion over the period.
Investors have become selective during the recovery and are putting money in companies that are viewed to be stable against the effects of coronavirus, rewarding stocks such as Safaricom, BAT, and Equity.
However, firms that have struggled under the effects of Covid-19, including East Africa Breweries Limited, Centum Investment, Kenya Power, and Scangroup, have been punished by investors.
Depressed advertising spend has hurt Scangroup, while lower electricity consumption and shortened business hours have pummelled Kenya Power and EABL sales respectively.
“Value investors have concentrated on stocks with a good earnings potential, mainly Safaricom and banks. Speculative investors have also made handsome profits on counters such as Nairobi Business Ventures,” said Sarah Wanga, AIB-AXYS Africa head of research.
Safaricom's share price has gained 62 percent since Covid-19 first hit Kenya in March 2020, closing at Sh41.80 a unit on Friday.
This gain has entrenched its position as the NSE's dominant stock, accounting for 60 percent of the market's total capitalisation or investor wealth that stands at Sh2.77 trillion.
Analysts expect that the market will eventually regain some equilibrium where price movement is more fairly distributed among the different stocks and market segments, backed by new products and a return to profitability for most companies.
However, Sterling Capital analyst Davis Gathinji sees risk if the fiscal position of the government doesn’t improve, which could see a fresh attempt to reintroduce capital gains tax on stocks.
The lack of new listings also remains an issue for the NSE, making it hard to resolve the problem of market concentration among the top four firms – Safaricom, Equity, KCB, and EABL – which account for 78 percent of the investor wealth at the bourse.
