Nairobi Security Exchange sheds Sh356b as Corona bites

Zachary Ochuodho @zachuodho

Just like other global stock markets, which have so far been rattled by the coronavirus pandemic, Kenya’s financial market has also not been spared. 

A week after the first case was confirmed, the Nairobi Securities Exchange has reportedly shed Sh356.05 billion.

The market cap of some counters has shrunk. For instance, Williamson Kenya’s market cap shrunk from Sh19.07 billion to Sh15.91 billion, Sasini Sh36.2 billion to Sh35.83 billion, Absa Sh83.76 billion to Sh57.57 billion and Diamond Trust Bank Sh252.65 billion to Sh242.55 billion.

Equity Group Holdings market cap declined from 1.52 trillion to Sh1.4 trillion, KCB group Sh1.26 trillion to 1.2 trillion, NCBA Sh203.21 billion to Sh191.68 billion while Co-operative Bank Group market cap declined from Sh749.30 billion to Sh721.03 billion.

Stanbic Bank and Stan Chart are, however, the only counters which appear to have defied the slide.

StanChart market cap increased from Sh629.02 billion to Sh639.84 billion, while Stanbic’s increased from 363.89 billion to Sh377.22 billion from March 13 to March 20.

First detected

Felix Otieno, an investments analyst at Cytonn Investments said since the virus was first detected, there have been massive sell-offs in the equities market as investors divest away from risky assets.

“The sell-offs saw the Nairobi All Share Index drop by 0.5 per cent between March 13 and March 20 and 20.1 per cent on a year-to-date basis, and the resultant heightened demand for fixed income instruments as investors sought safe havens,” he said.

The shilling has depreciated by 3.7 per cent against the US dollar to close at a 4.5-year low of Sh105.1 this week.

“The spread of the virus has also disrupted the global supply chain and Kenya has not been spared either.

Imports from China account for approximately 21 per cent of Kenya’s total imports and with the current lockdown, activities within the manufacturing sector are likely to be disrupted,” he said.

Churchill Ogutu, an analysts from Genghis Capital said although the equities market has regressed significantly during the week with the NASI, NSE-20 and NSE-25 plunging 14.4 per cent, 11.5 per cent and 13.9 per cent respectively during the week, the viral infection has opened up value investing opportunities in the country.

 “In our view, most stocks are trading below their net cash position (NCP) per share,” he said. 

Basically, if a stock trades below its NCP/share, it means the business has been discounted as a going concern, disregarding the contribution of its fixed capital (PPE) and working capital (inventory, receivables, payables).

 However, Sarah Wanga, a research analyst said it was too early to predict the full impact on the capital markets.

“While the spillover effects from countries badly hit by the virus have started being felt in the tourism, manufacturing and agricultural sectors, the Kenyan economy is in the early stages and we expected constrained economic growth,” said Wanga.

 She argued that as a result of the impact, consumer purchasing power may also diminish progressively but added that agricultural production is likely to weather the storm.