The Nairobi Securities Exchange (NSE) posted the highest single day trading in company shares this year on Wednesday (September 17), lifted by healthy half-year corporate earnings, prospects of initial public offerings (IPOs) and news of the expected reduction in interest rates in the US.

 

The bourse closed the trading session with 83.7 million shares valued at Ksh3.2 billion ($24.8 million) up from 22.8 million shares valued at Ksh741 million ($5.74 million) posted on September 16.

The banking sector dominated the trading activity, closing with trades worth Ksh2 billion accounting for 72 percent of the total value led by Equity Bank, which traded shares worth Ksh1 billion ($7.75 million), KCB (Ksh561.6 million, $4.35 million) and Stanbic Holdings (Ksh201.9 million, $1.56 million).

The bond market, however, registered bonds worth Ksh13 billion ($100 million), down 18.75 percent from Ksh16 billion ($124 million) registered the previous day.

Foreign investors sold Ksh2.86 billion ($22.17 million), a 1,006 percent jump from the previous session, driving net outflows of Ksh2.8 billion ($21.7 million) as profit-taking picked up ahead of the Fed’s rate cut decision.

NSE’s Head of Trading David Wainaina says the market is responding to improved fundamentals of listed companies relating to increased profitability and dividend payouts as well as the prospects of improved macroeconomic fundamentals related to a reduction in interest rates by the US Federal Reserve.“There was a review of the Fed rate from a macro perspective, and I think the market factored that from a macro perspective because when the rates are coming down of course you expect the equity side will have a reverse effect as it were. You also know that, based on all the companies that have announced their financial results, they have reported significant growth compared to last year right from profitability and from a dividend payout perspective fundamentally you can argue that the market is also supported by the fundamental performance of the companies,” Mr Wainaina told The EastAfrican.“If the macros are right from the interest rate perspective, the companies are reporting profit across the sectors based on what have been published this year, then we have seen a lot of interest from local institutions, we have also seen appetite from local retail, we have seen appetite from foreign investors as well. So, it is across the board so you cannot pick on one that is chasing this.”The Federal Reserve cut its policy rate by 0.25 percentage points with an aim of achieving maximum employment and inflation at the rate of two percent over the longer run.

The 25-basis point cut marked the first time the Fed has eased rates since last December and it lowered the Fed’s benchmark interest rate (federal funds rate) to a range of four percent to 4.25 percent, with officials signalling the possibility of two more rate cuts this year.“In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook,” the Fed said in a statement dated September 17.

”The reduction in US interest rates benefits emerging and frontier economies by increasing capital inflows, reducing borrowing costs for governments and companies, and potentially prompting their own central banks to lower rates, thereby stimulating growth.“On that day (September 17 the activity on the bond space was also equally high. So, I want to qualify that to investor appetite across the board and performance of both equities and bonds. I must say because when rates are coming down the valuations are up and therefore investors are taking advantage of this in the secondary market that is how I look at it,” Mr Wainaina said.

According to the NSE, the growth momentum on the bourse could be maintained until the end of this year but largely depends on the performance of the economy.“We have said, based on that fundamental performance of the economy, this performance (of NSE) in our view will be extremely sustainable towards the end of the year. We expect to close the year on a high. We also know, as public information, that an IPO is coming up and so investors are taking positions, so we expect a very strong outlook from where we sit as an exchange. As for how long it can be sustained, we don’t know because it is a factor of the economy.”Equity turnover at the bourse closed the trading session on September 19, with 18.89 million shares valued at Ksh573.32 million ($4.44 million) traded, an increase from the previous day’s 11.99 million shares valued at Ksh377.29 million ($2.92 million).

© Copyright 2022 Nation Media Group. All Rights Reserved. Provided by SyndiGate Media Inc. (Syndigate.info).