Kenya’s equities market will be flat in 2017, heaping more losses on investors who for the past two years have seen their wealth at the Nairobi Securities Exchange (NSE) eroded, Nairobi-based investment firm Cytonn says.
Uncertainty created by the rising political temperatures ahead of August polls and decline in prices of various stocks are among things that would hit the market.
“We expect the Kenya equities market to be flat, driven by slower growth in corporate earnings, neutral investor sentiment on the coming general election and the rate hike cycle in the United States,” said Cytonn, adding that fear arising from the August general election has made both local and foreign investors take a wait-and-see approach.
The decline in the prices of banking stocks due to anticipated decrease in interest income following introduction of loans caps is expected to also affect the market, pushing down the shares that consist of a huge chunk of large stocks.
“Currently, the market is on a bear-run, mirroring the decline from the August 2010 peak to the December 2011 trough. A casual glance at the equities chart indicates they are headed for a further decline for a few months before reversing trend,” said Cytonn.
Nairobi All Share Index (NASI) was last week named the worst performing index globally, having dropped by 7 percent since the beginning of the year.
In 2016, all the key indices of the bourse namely NASI, NSE 20 Share Index and NSE 25 Share Index went down by 8.5 percent, 21.1 percent and 15.8 percent respectively.
“Since the February 2015 peak, the market has lost 47 percent and 30.1 percent for NSE 20 and NASI, respectively,” noted Cytonn.
Market capitalisation ended Friday last week at 17.4 billion dollars, a marginal decline from the previous week. Investors have lost about 9 billion dollars of their paper wealth in the last two years as the bourse the index plunges.
However, it is not all gloom, Cytonn expects gradual rise of equities allocation in 2017, and advises investors to pick stocks that are deeply undervalued but with strong earnings prospects.