One company, Safaricom, has single-handedly pushed the Kenya-based Nairobi Security Exchange (NSE) to a new all-time high market capitalization.
Safaricom shares opened Monday last week at Ksh. 29.50 and by Friday, it had registered a 7.6% rise (Ksh.2.25) to close the day at Ksh. 31.75. By the close of trade of Friday last week, shareholders had a collective capital gain of Ksh. 90 billion; the rise in Safaricom share price pushed the NSE market capitalization to an all-time high of Ksh. 2.83 trillion.
Analysts say that investors are warming up to the telecom because of prospects of higher earnings as Safaricom is said to be working on introducing a new product into the market.
As cited by Business Daily, Mercyline Kyalo, a senior analysts at Kingdom Securities, said: “Safaricom is a ‘go to stock’ for many investors especially because of its large liquidity. Despite Safaricom trading at a premium to its fair value, investors seem to be pricing in the innovations taking place which offer headroom for the business to grow its top line through data and M-Pesa revenues. There are also possibilities of Safaricom hitting some resistance at that level once buying interest subsides.”
At the beginning of this year, foreign investors were mainly selling off their stock while taking profits on the telecom. However, as a more recent development, they have begun buying the stock. Last week saw a lot of foreign investors buying back the stock, leading up to the rise in demand.
The NSE All-Share Index (NASI) rose to a record high of 192.2 points; gaining 3% in the past one week alone. While the weighted NSE 20 share index only gained by 0.2% last week closing at 3847 points.
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