Investors sold off Ksh.1.9 billion NSE stocks in 5 months
Foreign investors have sold stocks worth Ksh.1.9 billion at the Nairobi Securities Exchange (NSE) since the beginning of the year.
In the month of May, the investors withdrew Ksh.787.7 million worth of stocks amidst the pandemic to cushion themselves against continued volatility in the local market.
“Foreign investors turned net sellers, with a net selling position of US$.1.7 million, from a net buying position of US$.7.2 million recorded the previous week, taking the YTD net selling position to US$.17.5 million,” according to Cytonn report.
The performance of the NSE, however, continues to look up after the free fall witnessed at the onset of the pandemic last year.
According to Cytonn, the three NSE primary indexes for instance have proved a positive outlook having recorded gains of 1.9 percent (NSE 20), 11.7 percent (NASI) and 8.3 percent (NSE 25).
Nairobi All Share Index (NASI) has marked gains into the double digits in five months to May, putting NSE on the same level with other investment platforms such as Treasury bills (T-bills) and Money Market Funds.
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NASI’s PEG ratio currently stands at 1.6x, an indication that the market is trading at a premium to its future earnings growth.
Gains in large cap stocks including Safaricom, East Africa Breweries Limited (EABL), Absa Kenya, Kenya Commercial Bank (KCB) and Equity Group have anchored the returns for the NSE amidst continued volatility due to the pandemic.
For instance, the market currently trades at a price-to-earnings ratio 14.5x, 12 percent above the historical average ratio of 12.9x and a dividend yield of 3.7 percent, 0.4 percent points below the historical average of 4.1 percent.
NASI’s PEG ratio currently stands at 1.6x, an indication that the market is trading at a premium to its future earnings growth, indicating that NSE is overvalued.
If a PEG ratio is greater than 1.0x indicates the market may be overvalued while a PEG ratio less than 1.0x indicates that the market is undervalued.