Prime News Kenya

Investors' wealth at NSE drops Sh60bn on Evergrande crisis

Posted By : Justice Bimpeh

Investors at the Nairobi Securities Exchange (NSE) last month lost almost over Sh60 billion in paper wealth as the Evergrande Group’s crisis hit home.

Data from the Nairobi bourse shows market capitalisation dropped to Sh2.78 trillion from Sh2.84 trillion the previous month.

Evergrande Group, China’s second-largest property developer by sales, runs a risk of defaulting on its debts if the firm is unable to raise funds quickly.

The situation is worsened for the firm because out of its $300 billion in liabilities, interest payment to bondholders came due a fortnight ago.

Besides the Evergrande Group’s crisis, money market experts are attributing the declining performance at NSE to growth in corporate earnings that motivated investors to take out gains.

This is the first drop in the last five months and is expected to continue on expected investor flight as the country heads to general elections next year.

According to the report, the NSE 25 index fell by 2.6 per cent to 3914.52 points while the NSE 20 index was largely unchanged at 2031.17 points.

Nevertheless, all three indexes are still positive in the year-to-date (YTD) trading.

Large-cap stocks including Equity, KCB, EABL and Safaricom led the observed market correction in September.

The four stocks have for instance shed 4.7, 3.6, 2.8 and 1.2 percentage points in value across the month.

The decline is the second this year after a four per cent drop in March.

The worst-performing stocks since the beginning of September are Uchumi Supermarkets Ltd, Nairobi Securities Exchange Plc and Sameer Africa respectively, according to data compiled by Bloomberg.

Last week, the NSE 20 share price index increased by 4.2 per cent, while NASI and NSE 25 share price indices, declined marginally by 0.01 per cent and 0.31 per cent, respectively.

Market capitalisation, total shares traded and equity turnover declined by 0.01 per cent, 15.7 per cent and 42.4 per cent, respectively, during the week ending September 30.

The weakening trend is also seen in the government securities segment, with Treasury bills auctions undersubscribed due to factors including lower yields than earlier in the year.

The Treasury bill auction for the week ended September 30 received bids totaling Sh10.1 billion against an advertised amount of Sh24 billion, representing a performance of 42.2 per cent.

This despite interest rates on the 91-day, 182-day and 364-day, Treasury bills remaining stable.

Furthermore, bonds turnover in the domestic secondary market declined by 34.9 per cent during the week.

In the international market, yields on Kenya’s Eurobonds increased by an average of 11.7 basis points. Yields on the 10-year Eurobonds for Angola and Ghana also increased.