NSE shaken as major stocks, led by Safaricom, tumble

The All Share Index at the Nairobi Securities Exchange (NSE) hit its lowest level since June last year on Friday as some of the major stocks shed in value.
Weekly data by the Central Bank of Kenya shows the NASI closed the week at 123.26 points, having shed 3.9 per cent in the past four weeks and 25.3 per cent year-to-date, the lowest it has traded in the past seven months.
Looking ahead, Trading Economics forecasts the index to be priced at 121 by the end of this quarter and at 116 in a year as the market enters a full bear on recession fears.
The equities market performance was mainly driven by losses recorded by large-cap stocks such as Bamburi, Safaricom, NCBA Group and BAT of 7.6 per cent , 6.4 per cent, 2.4 per cent and 2.2 per cent, respectively.
Although no major reason has been given for the low trading, pundits are relating Safaricom’s current depreciation to a regime shift both in the country and at the telco’s board.
Early this month, the company that commands half of the daily trading at the NSE announced the sudden resignation of John Ngumi as the chairperson, barely six months at the helm.
In a statement, it said that Ngumi had resigned both as a director and chairperson on December 22 to focus on developing green energy generation across the continent with an emphasis on green hydrogen.
It also announced the election of lawyer Adil Khawaja as a director to the company, adding that the election of a substantive chairperson will be done in the coming weeks.
“The appointment was approved on January 5 and is subject to regulatory approval,” a statement signed by the firm’s secretary Kathryne Maundu read in part.
After the announcement, the telco’s share price dropped to hit Sh22 on January 9, the lowest in a decade.
Safaricom’s share price hit a record high of Sh43 on August 13, 2021, sending the telco’s valuation to a new high of Sh1.722 trillion, representing 61.2 per cent of the combined investor wealth at the Nairobi bourse.
The share has shed a third of its value since last year, dropping from Sh37.95 in January 2022, which has translated into a market cap erosion of close to Sh500 billion.
Stock market expert Mary Abale says the counter is likely to drop further in the coming months as the government’s Hustler Fund takes on Fuliza, the firm’s highest revenue earner.
“Apart from investor flight based on current market dynamics and change in leadership, the newly launched Hustler Fund is likely to take a good slice of Fuliza market,” Abale said.
She laments that the depreciation is likely to have a huge impact on NSE trading, considering that the telco is among the dominant players, accounting for half of the market capitalisation.
Her sentiments are echoed by another stock market enthusiast, Paul Ndirangu who foresees a market crash in the coming days if the current trend persists.
“We have seen at least half of the top 10 top counters at the Nairobi bourse shed, largely on foreign investor flight in the wake of an impending recession. This is a sad story. The dropping in Safaricom’s share value is accelerating the storm,” Ndirangu said.
According to the latest Capital Markets Soundness report, the market concentration for the top five firms for the quarter that ended June 2022 averaged 77 per cent out of 65 listed companies.
“The market concentration risk that the capital markets continue to face remains a key policy discussion. The market is likely to crash in case one of those stocks goes under,” Capital Market Authority (CMA) says in the report.
Other indices like the anchor NSE 20 and NSE 25 also dropped declining by 0.6 per cent and 1.2 per cent, respectively.
In general, investors lost Sh55 billion in paper wealth in the week ended January 13 as the market capitalisation dropped to Sh1.93 trillion compared to Sh1.98 trillion the previous week.
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