Safaricom securities exchange dominance falls to 40.6 percent

Safaricom Plc’s dominance of wealth at the Nairobi Securities Exchange (NSE) dropped further in the quarter to June when it represented 40.6 percent of the total market capitalisation.

While the company retains its position as the most valuable firm, its capitalisation as a percentage of the total NSE valuation has been declining, dropping from 56 percent in a similar quarter last year.

The drop has coincided with the stock’s falling share price which has in the year to date shed 30.2 percent to close at Sh16.80 as of Friday last week from Sh24.05 on January 3.

Read: Is Safaricom share at the NSE oversold?

Safaricom’s market value averaged Sh675.7 billion in the quarter under review when the average total market capitalisation stood at Sh1.6 trillion.

The telco’s falling share price since the start of the year mirrors the performance of the NSE that has remained under pressure mainly from sell-offs by foreign investors.

The decline of the telecoms firm share price is attributable to foreign investors holding significant interest in the company which they have been reducing, sending the stock lower.

Other top NSE stocks by market capitalisation in the quarter were Equity Group, EABL, KCB Group, Co-op Bank of Kenya, Absa Bank Kenya, NCBA Group, Standard Chartered Bank Kenya, BAT Kenya and Stanbic Holdings.

Combined, the 10 leading stocks had an average market capitalisation of Sh1.3 trillion to represent 84.2 percent of the NSE wealth.

Incidentally, Safaricom was also the most traded counter in the quarter having recorded an average turnover of Sh2.2 billion in the review period, beating the second most traded stock in Equity Group by more than two-fold.

The continued exit of foreign investors from the market has been tipped to continue driving down the valuation of NSE-listed firms.

This is despite the company’s fundamental remaining sound in what some analysts have described as irrational pricing.

“Since pricing is primarily driven by demand and supply dynamics that are irrational to market and company-specific fundamentals, foreign investor apathy, and worse sell-offs, are expected to result in pervasive price erosion,” noted analysts at Genghis Capital.

Read: NSE wealth down Sh116bn on Safaricom profit decline

The foreigners’ exit has been linked to the adoption of defensive portfolio strategies that favour asset classes in developed and top-tier emerging markets.

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