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Market analysis week ending Jan 30

NAIROBI, Kenya, Jan 31 – The Nairobi Stock Exchange (NSE) is in Pre -Announcement mood and the bulk of activity was reminiscent of dividend-conscious investors taking positions ahead of the expected announcements.

Overall, 26 listed companies are expected to announce between mid February and end of March to beat the three- month window allowed by the Capital Markets Authority (CMA) to lapse from their year end to disclosure of their financial results to the public.

The financial sector is expected to lead the pack with 11 companies expected to announce results in February as they are governed by more stringent disclosure rules from the Central Bank of Kenya (CBK). Barclays Bank, Equity and KCB are the main focus in this sector as they have been engaged in a competitive effort to establish their dominance in the local banking sector.

BBK saw increased trading especially from local investors after the massive dumping by foreign investors in the last few months left its share price battered, falling from Sh73 in June 08 to record lows of between Sh42 and Sh49 during the fourth quarter of 2008. This has prompted local interest in the stock as it has become within reach to retail investors with an annualized P.E of 11.56 and has seemingly stagnated at a support level of between Sh47 and Sh49 per share.

Equity bank and KCB stocks on the other hand maintained their value over the week and are also showing signs of stagnation with minimal price fluctuations despite high volumes changing hands mainly between local investors in the case of KCB and high foreign sales which were comfortably absorbed by local investors in the case of the Equity stock.

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Co-Operative Bank also dipped to Sh7.95 after bulk sales by foreign investors earlier in the week only to settle between Sh8.25 and Sh8.75 supported by local demand for the stock. The patterns indicate that investors are anticipating good results from this sector as a whole as activity in the normally vibrant sector has diminished to take second fiddle to other sectors over the last two weeks.

The Commercial and services sector was particularly active with five companies expected to post results notably the media and advertising industry , a major growth sector over the previous financial year buoyed by an eventful 2008.

The 2007 election period and the U.S.A election year are expected to have positive effects on their results. Nation Media Group (NMG), Scangroup and ICT service provider Access Kenya are the stocks to watch in this sector. (There is a close link between ICT and Media with internet advertising being touted as a growth area in WPPs 2009 global forecasts). Scangroup and NMG saw a spike in foreign buying during the week and was effectively the only area where foreign investors seem to have been buying large volumes with the exception of Safaricom which saw all round activity with the highest trading volumes to hover between 3.15 and 3.25.

Scangroup’s balance sheet and growth forecast will be boosted by the recent fund infusion by WPP International.

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The cement industry also bore the brunt of foreign-driven supply with Bamburi losing approx. Sh15 in value over the week as the stock saw supply levels not being supported by demand.

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Athi River Mining (ARM) saw a surge in supply at the beginning of the week but stood its ground at between Sh90 and Sh91 buoyed by strong local demand but finally seemed to lose resilience closing the week at Sh85. The sector which is populated by largely cyclical stocks has been characterised by high uncertainty causing huge swings in demand and supply as well as volumes traded as investors attempt to position themselves for some traditionally high dividend paying stocks like Total Kenya which hovered between 29.50 and 32.75 during the week. Total stocks were mainly traded among local investors and remained pretty stable in price Total is very consistent in dividend payments.

The secondary bond market remained relatively quiet over the week but the primary market in 91 Days T-bills and 182 Days T-bills continued to get increased levels of oversubscription with the second February bill recording 229.37 percent performance rate. The increase in subscriptions is being seen as a signal of the success of the lowering of minimum investment in T-Bills to 100,000 which has begun to attract retail investors. The move puts commercial banks in competition with the CBK which is looking to raise money to bridge a massive budget deficit.

The government also launched a 15 year infrastructure bond with extremely attractive terms including waiving of 100 percent withholding tax and a 12.5 percent interest rate.


The global crisis, inflation, pegged to fuel costs and exchange rates will be a major feature in the performance of most listed firms in the second half of 2008 an issue of significant effect will be those companies which have big foreign currency-based loans or conduct business in different currencies as the exchange rate risks have been magnified by the weakening shilling. Investors should therefore pay attention to the strategies such companies have put in place to hedge against such risks.

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These effects will be compounded by the early 2008 post election chaos thus leading to reduced profit growth and turnover for the year. There is definitely going to be a high level of uncertainty in 2009 projections as the overall business environment is still not secure from the effects of the global credit crunch as well as the impending threat of inflation despite lower fuel costs.

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