Bourses’ bear-run to persist as investors flee into bonds

East Africa’s stockmarkets stayed on the downward path in the first three months of the year as local investors stayed away from the equity market and moved into government bonds to prevent value erosion with the falling share prices.

Equity market reports for quarter one show that investors increased their appetite for Treasury bonds compared with shares, leaving foreign investors to dominate the equity market.

Kenya’s Capital Market Authority reckons that the poor financial showing of most listed companies is likely to affect the performance of regional bourses this year as investors go for alternative investment options with better and stable returns such as bonds and real estate.

The poor financial showing of publicly quoted companies became apparent when 15 companies trading shares on the Nairobi Securities Exchange issued profit warnings, meaning that their earnings for 2018 would fall by at least 25 per cent.

“The reported slowdown in performance of listed companies is likely to affect the performance of capital markets in the short to medium-term,” CMA said in its latest Capital Markets Soundness report for quarter one that was released last week.

Equity turnover on the Kenyan bourse declined 26 per cent to Ksh45.48 billion ($454.8 million) in the three months to March 31 this year, from Ksh61.15 billion ($611.5 million) over the same period last year, while volumes of shares traded fell 21.76 per cent to 1.67 billion from 2.13 billion in the same period.

In Kenya, average foreign investor participation accounted for 74.91 per cent compared with 57.37 per cent in the same period last year. The Kenyan government during the same period issued seven Treasury-bonds seeking to raise Ksh152 billion ($1.52 billion) but the issues were oversubscribed by more than 80 per cent, having received bids worth Ksh276.22 billion ($2.76 billion).

In Tanzania, the Dar es Salaam Stock Exchange ended the month of March on a low note, with total turnover declining to $12,182, from $75,324 in February, according to analysts at the Africa-focused advisory firm StratLink.

“Consequently the bourse stayed in the red with the key benchmark indices trending southwards,” the analysts said.

Tanzania Breweries Ltd and the self-listed DSE were the top movers. Tanzania’s Industrial and Allied index fell 2.1 per cent to 4,883.9 points, the banking index declined 1.6 per cent to 2,103.9 points while the commercial services index fell 0.6 per cent to close at 2,255 points.

In Uganda, the All Share Index on the securities exchange rose 10 per cent to 1,764.2 on March 25 from 1,599.4 on January 7, while the Rwanda Stock Exchange All Share Index rose to about 136 from 131.2 in the same period.

Analysts at Sanlam Investments East Africa Ltd said East Africa’s stockmarkets extended their dismal performance to the month of April posting reduced trading across all markets.

In Kenya, the list of top price gainers in the three months to March 31 included Express Kenya and Longhorn whose share prices rose 50 per cent and 37.53 per cent respectively. Other counters that recorded share price appreciation were I&M Bank (33.53 per cent), NIC Bank (30.76 per cent) and Safaricom (24.1 per cent).

Kenya Airways topped the list of losers with a 44.83 per cent drop, followed by Uchumi Supermarkets (30 per cent) and British American Tobacco whose share price fell 24.97 per cent.

Liberty Kenya Holdings Ltd  and Kenya Re-Insurance Corporation (Kenya Re) lost 21.15 per cent and 19.66 per cent of their values respectively.

Analysts at Standard Investment Bank expect the share price decline on the NSE to continue until the end of May with Co-operative Bank among the worst performing top movers.

Co-op Bank, which has operations in South Sudan, closed the trading session on May 6 at Ksh12.55 ($0.125) per share, the lowest share price in two years, saddled by high net outflows of $420,900.

KCB and Equity Bank had the highest foreign net inflows of $717,000 and $676,000 respectively. For the three months to May 6, Co-op bank’s stock lost 20.3 per cent of its value to stand at Ksh12.6 ($0.126), Housing Finance dropped 39.2 per cent to Ksh4 ($0.04) while National Bank of Kenya lost 19.8 per cent to Ksh4.8 ($0.04). Other losing bank counters are Diamond Trust Bank Barclays and NIC.

Safaricom, I&M Bank, Stanchart, KCB Equity bank and CfCstanbic topped the list of gainers.