KES 96bn in a day...if you were at this rally

Hello everyone (yes, you, our handful of single digit early subscribers).

We've never done this before. Being April 1st, do you believe us? Read on & we'll see.

Here are the stories that caught our eyes and ears in the week:

• The world's largest asset manager paid the CBK Governor a visit
• Billions were made at the NSE last week
• Investors are dumping the capital markets for real estate

At this point, how does one decide what moves to make with all the contradicting news? That's why we're here. To make it all make sense. Without further ado, let's get started.

Pro Tip #1 - Never consume financial information in isolation...

SPOTLIGHT

The market rallied, no cap!

No really, it did. Where? The Nairobi Securities Exchange is where. And last week if Lady Luck was on your side, you enjoyed not one, but two rallies (wink wink, some sweet pics here).

What Happened

Before the WRC Safari Rally, the NSE on Tuesday witnessed its biggest single-day gain in 18 months, as blue-chip firms led by Safaricom continued their recent price rally on local investor demand. Sentiment: Positive.

Between The Lines

Remember "Pro Tip #1" above? Big number headlines in financial markets are easy to fall for as click bait if you don't consider prevailing circumstances. In such a story, look for what caused the gain, whether this was an isolated event or the start of a trend, who are the actors & what's motivating them.

Should You Care?

NSE equities are coming off a very low base and multi-year declines and at some point last year, it was the worst performing in Africa. You should pay attention if you're making asset allocation decisions for the new quarter.

HEADLINES

This week's big stories

• BlackRock paid the CBK Governor a visit: Dr. Kamau Thugge, the Central Bank of Kenya governor was recently visited by officials from global investment firm, BlackRock, who have stayed away from the Kenyan market for four years. Dr. Thugge says key among the reasons for Blackrock’s appetite for the Kenyan market are the developments being witnessed in the foreign exchange market. 
• Billions were made at the NSE last week: The Nairobi Securities Exchange (NSE) added Sh95.53 billion in investor wealth on Tuesday, its biggest single-day gain in 18 months, as blue-chip firms led by Safaricom continued their recent price rally on local investor demand. The NSE’s market capitalisation stood at Sh1.831 trillion at the close of trading, the highest since October 3, 2023. 
• Investors are dumping the capital markets for real estate: According to property firm, Hass Consult, growing population, technological advances and government interventions have significantly transformed the value of Kenya's real estate assets. This has led to a flight of capital to real estate over securities due to the sector's resilience. According to the latest Hass Consult Land price index, in the fourth quarter of 2023, average land prices of an acre of land across Nairobi's suburbs saw a rise of 3.3% - the highest quarterly rise since first quarter of 2015.

INSIGHT

Explained by AI (and I): Market Cap

What is Market Cap? Simply put, market capitalization (often called "market cap"), is the value of the shares of a company (or group of companies) obtained by multiplying the share price by the number of shares issued by the company. Easy.

Here it is explained by AI (and I):

Definition: It is the total value of a company as perceived by the stock market. It's a measure of the company's size and worth in the eyes of investors.

Calculation: It is calculated by multiplying the current market price of a company's stock by the total number of outstanding shares. For example, Safaricom has 40.07bn shares outstanding. At a market price of KES 17.40 per share, its market capitalization would be KES 697.218bn (40.07bn shares x KES 17.40 per share). Hopefully from this, you see that a small price change in a company with a lot of shares issued (like Safaricom) has a disproportionately large impact on the "entire market".

Significance: Market capitalization provides investors with insights into a company's size, its position in the market, and its risk profile. Large-cap companies are generally more established and have a lower risk compared to small-cap companies, which may offer higher growth potential but also carry higher risk. Investors often use market cap as one of many factors to assess investment opportunities and to diversify their portfolios.

Market Dynamics: Changes in a company's stock price or the number of outstanding shares can affect its market capitalization. If the stock price increases while the number of shares remains constant, the market capitalization will increase, indicating positive investor sentiment. Conversely, if the stock price decreases the market capitalization will decrease.

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So when you hear that the "market went up", it essentially equates to the market capitalization of several listed companies having experienced increase in value due to their prices rising.

ICYMI

Bonds: Stirred, not shaken. Bond turnover at the Nairobi Securities Exchange could cross the KES1 trillion mark (yes, 12 zeroes) for the first time this year. Retail investor participation has more than doubled in 10 months due to ease of access and increasing interest rates. Higher turnover will depend on interest rate outlook & continuing liquidity.

NCBA is sharing the spoils. NCBA Group is set to pay a record Sh7.8 billion dividend following a 56.2 percent jump in net profits for the year ended December 2023. The record dividend comes amid a rise in NCBA's net earnings to Sh21.4 billion from Sh13.7 billion previously on stronger operating income and contained costs. Total operating income rose to Sh63.6 billion from Sh60.9 billion supported by a 13 percent jump in net interest income. Happy shareholders here.

KRA needs target practice. The Kenya Revenue Authority (KRA) is likely to miss the tax collections target for this financial year by Sh330 billion. The fall in collections came against the backdrop of increased taxation that hurt consumption as hard-hit homes and businesses cut spending. The KRA has in the recent past stepped up its efforts to deal with he rising tax targets in the middle of a tough economy. Keep an ear open for more tightening from KRA.

REGION

What in the East Africa?

[TZ] BoT injects 100 million US dollars to prop up shilling: “We are taking different workable measures to ensure our shilling against the foreign money is stable. Last week we sold 100 million US dollars to commercial banks and we will do it again…,” the BoT Governor, Mr Emannuel Tutuba, told reporters in Zanzibar. [Link]

[UG] Bank of Uganda Downgrades 3 Tier 1 Banks to Credit Institutions: This follows a recent increase in the minimum paid-up share capital requirement for Tier 1 Commercial Banks to UGX 150 Billion (approx. USD 40.32Million) by 30th June 2024. [Link]

[RW] Should Uchumi be delisted from the RSE?: Two years after cross-listing on the Rwandan bourse, the firm closed its subsidiaries in Uganda and Tanzania and folded operations due to piling debts, executive misconduct, and merchandise theft. [Link]

[ET] Ethiopia's biggest bank says it has recouped most of the cash lost during a system glitch: Commercial Bank of Ethiopia’s says it has recouped nearly 80% of the cash it lost during what it says was a glitch in its system that allowed customers to take out more money than they had in their accounts. [Link]

RADAR

What we're watching this week

Here are the topics we will be keeping an eye on for you this week:

• More earnings announcements & more gains on equities as the market kicks off Q2? Ring up your broker or asset manager in good time.
• Rate expectations for 'tap sales' of a 5- and a 10-year bond from CBK looking to raise KES 25bn (on a first-come, first-served basis).
• Where will the USD/KES exchange rate settle? "...the fundamentals are not explaining the performance of the shilling..." says NCBA Group CEO.

CURIOUS

Two good not to share

One: “Who am I?”. If you’re like nearly every other human & have ever asked yourself this question, then you really should watch this TED Talk that my YouTube algorithm served me (thank you for this one Alphabet). Trust me, it’s worth your 12 mins…and a very different take on what it means to be you.

Two: I'm always on the hunt for more "Monday Music" to add to that playlist. Here's a track by Just A Band to get your head bobbin'.

Thank you for making it this far. If nothing else, you won't be blindsided if someone asks you whether foreign investors are considering market cap of the blue chips they're buying & selling!

Have the best week possible.

Yours truly.

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