Share prices of Safaricom and top banks including Equity and KCB have witnessed a sustained drop in prices despite record profit and dividends, pulling the combined wealth of Nairobi Securities Exchange (NSE) investors to levels last seen 10 years ago.
Market data shows investors’ paper wealth touched Sh1.604 trillion on Friday and recovered slightly by Sh8.5 billion to close Monday at Sh1.613 trillion, keeping NSE near the level seen in the week ended July 25, 2013, when the market hit Sh1.432 trillion.
Safaricom, KCB, Equity, Co-op Bank and East African Breweries (EABL), which account for 68.3 percent of the entire market capitalisation, have shed Sh142.31 billion in the past four weeks, leading to the NSE tumble.
The announcement of the Sh23.42 billion Safaricom interim dividend that was paid on March 31 failed to lift the telco’s share that closed Monday trading at Sh15.95, a drop against Sh24.15 at the close of December.
Nine tier-one lenders — Equity, KCB, Coop Bank, NCBA, DTB, Stanbic Bank, Absa Bank, StanChart and I&M— have suffered a similar fate despite increasing their combined dividend payouts by 22 percent to Sh63.07 billion as net profit for last year rose by 25.2 percent to Sh176.86 billion.
Analysts say the fall in share prices despite growth in profits and dividend payout is because of sustained foreign investors selling their shares for attractive returns in developed markets such as the US and retail investors responding with panic sales, pulling down the prices further.
Kenneth Minjire, senior associate for debt and equity at AIB-AXYS Africa, said there has been a general apathy of local high-net-worth individuals and retail investors, causing a depression in the prices.
“Despite the good dividends, buyers are few. Retail investors have really been selling off and there are not enough offshore volumes to support the prices despite there being good financial results,” said Mr Minjire.
“As long as offshores stay out, our local returns cannot support our market. When offshore investors are out, it is like saying 50-60 percent of our market is not trading.”
Weak shilling, dollar shortages and the geopolitical concerns over the continued Russia-Ukraine conflict and the spiralling inflation that forced benchmark interest rates hikes in Western markets such as the US, also contributed to the capital flight from the NSE.
More price drops are expected in the coming days as at least 22 NSE firms including Jubilee, Equity, BAT, Stanbic and KCB close their books between this month and the end of July for dividend payment.
Safaricom has between April 6 and Monday shed Sh106.17 billion to account for the bulk of the NSE decline over the past four weeks.
EABL and KCB have in the past four weeks shed Sh17.2 billion and Sh15.1 billion respectively. The value of Equity has dropped by Sh2.08 billion while that of Co-op Bank fell by Sh1.76 billion.
The share of EABL has cooled off after the end of Diageo’s offer to buy 118.39 million EABL shares at Sh192 apiece, representing a premium of 39 percent.
Retail investors are usually expected to be attracted to discounted share prices when foreigners retreat but this has not been happening, leaving the trade volumes low and depressing prices further due to oversupply.
“There are many retail investors going through a difficult time economically and so they have been cashing their shares as they see prices falling, affecting the prices further,” said Mr Minjire.
The NSE data shows equities turnover hit Sh4.22 billion last month, marking a drop from Sh32.4 billion in the previous month to mark one of the lowest turnovers in a single month.
Analysis of pension schemes done by Actuarial Service East Africa (Actserv) shows that the downturn at the NSE saw pensioners’ negative returns on equities worsen from the negative 4.8 percent in the first quarter of last year to negative 7.2 percent in the three-month period ended March.
“The decline in local equities was attributable to foreign investor outflows following the dollar liquidity constraints and high-interest rate environment in developed markets,” said Actserv.