NSE investors take profit positions ahead of 2020 results


NSE investors take profit positions ahead of 2020 results
A display of listed equities at the NSE. PHOTO | CITIZEN DIGITAL

In Summary

  • According to analysts, counters recording profit growth and not dividends might be the greatest motivator to investors as shareholder pay outs remain uncertain.
  • The performance of Kenya’s equity market has been on a recovery path since the start of the year with all three NSE indices marking year to date gains of 3.3 per cent (NASI) two per cent (NSE 25) and 0.3 per cent (NSE 20).
  • Last year, listed entities and in particular banks suspended dividend payments as a cash-preservation stance on the back of liquidity constrains resulting from the emergence of the COVID-19 pandemic.

Nairobi Securities Exchange (NSE) investors are moving to take up profit taking positions ahead of the release of 2020 full year financial results.

According to analysts, counters recording profit growth and not dividends might be the greatest motivator to investors as shareholder pay outs remain uncertain.

Analysts at AIB-AXYS Africa for instance anticipate a rally in banking prices on counters likely to declare dividends.

“We anticipate a rally in bank prices as investors take profit taking positions on counters that they feel will pay a dividend ahead of the release of FY20 earnings in March,” they said.

Apart from Safaricom, AIB-AXYS Head of Research Sarah Wanga states it will be difficult to tell which counters will be pay out a dividend as she anticipates more activity to hit the NSE at the start of the reporting phase.

“It will be hard to tell which companies will be paying out a dividend. However we expect to see more activity as companies begin releasing their results. Activity will be concentrated around firms paying out dividends or those recording increased profits,” she said.

Last year, listed entities and in particular banks suspended dividend payments as a cash-preservation stance on the back of liquidity constrains resulting from the emergence of the COVID-19 pandemic.

Among the counters to have pulled the plug on part or the entire shareholder pay out included Equity Bank, NCBA and the Standard Chartered bank.

The performance of Kenya’s equity market has been on a recovery path since the start of the year with all three NSE indices marking year to date gains of 3.3 per cent (NASI) two per cent (NSE 25) and 0.3 per cent (NSE 20).

The performance has been driven by gains in large cap stocks such as EABL, BAT, KCB and Equity Group.

The return of foreign investors to the bourse has also boosted activity as the offshore dealers grow their net buying position to Ksh.131.6 million ($1.2 million).

Foreign investor activity has been boosted by Kenya’s recently increased weighting on the Morgan Stanley Capital International (MSCI) emerging markets index.

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