Global and local market conditions
The US and European stock markets recorded big gains towards the end of the week after 84 out of 91 European banks passed stress tests carried out by the Committee of European Banking Supervisors. The tests were designed to check if European banks would be able to survive another major financial crisis. The Chinese Shanghai Composite Index and the Bovespa Index (Brazil) both shot up over 6% in the week.
The Nairobi 20 share index declined by 1%. The Ghana and Nigerian all-share indexes climbed by 1.4% and 1.7% respectively. The Nairobi market seems to have taken a breather going into the August 4th constitutional referendum. A peaceful and successful referendum will likely accelarate the good run that began early this year.
Price movements of select commodities
Tea +0.4%, Coffee +0.4%, Sugar +7.7%
(Sources: African Tea Brokers Ltd, Financial Times)
Central Bank of Kenya mean exchange rates July 25, 2010
USD 81.58, GBP 124.68, EUR 105.10
NSE Movers review
Top Gainers
Express +6.5%, Carbacid +6.0%, Unga +5.9%, StanChart +5.0%
Top Losers
Centum -14.7%, EA Cables -10.8%, Pan Africa -8.0%, Kakuzi -7.0%
StanChart
StanChart shares have risen significantly this week, investors could be moving into this counter after a strong jump last week in Barclays' share price (its closely related peer) and in expectation of good half year results. StanChart has climbed from a price of Kshs 190 at the end of March to Kshs 250 this week: a gain of 31.6% in just four months. The high dividend yield (4.8% at the current price) and strong financial performance in 2009 and first quarter of 2010 have made this share attractive to investors. Trading at a PE of 12 (based on q1 2010) results, the share is still cheaper than Equity Bank, Barclays and CO-OP Bank, all of which trade at higher multiples. The share could rise further on the basis of this lower valuation and due to its limited float.
Centum
Centum's share price has dropped after closure of its books on the 16th of July for a bonus share issue (1 for every 10). The price drop has been overdone by at least 5%. The share should have fallen by just 9.1% rather than 14.7%. Centum's NAV per share ex-bonus is Kshs 15; the share is inexpensive considering that its NAV growth has beaten the NSE 20 Share index performance over the last six years. The company plans to increase its private equity exposure and to invest in the booming Kenyan real estate sector. Further price drops should be treated an opportunity to accumulate this share.
Quote of the Week:
"I've learned that you shouldn't go through life with a catcher's mitt on both hands; you need to be able to throw something back."
Maya Angelou
