Last month (August), equities rally continued as the market responded positively to the first half of 2026 (1H26) earnings season.
NCBA Investment Bank says in its September monthly report that investors surprisingly (quickly) bought large amounts of shares and equities, showing that there is positive sentiments, and confidence in the stock market.
Except that, agricultural stocks lagged, with Kapchorua Tea losing 10 percent month-on-month (M-o-M) and Limuru Tea -9 percent M-o-M, recording the largest declines.
On the one hand, the capital markets has quickly maintained the tempo with Nairobi Securities Exchange All-Share Index (NASI) gaining 5.7 percent month-to-month (M-o-M), driving YTD gains to +34.2 percent supported by large-cap counters.
Macroeconomic front, on the other hand, headline inflation edged up to 6.6 percent in August from 6.5 percent in July thanks to higher food, energy, and transport prices.
Food inflation rose 9 percent Year-on-Year (Y-o-Y), while transport inflation increased 15.7 percent Y-o-Y on higher diesel and petrol prices.
“With inflation still within the Central Bank of Kenya’s target range, the MPC held the policy rate at 8.75 percent at its August meeting,” NCBA says.
It also points out that investor sentiment on the Nairobi Securities Exchange remained positive, especially across the small caps, with Car & General (gaining +65 percent M-o-M) that saw a standout performance following 1H26 results.
Car & General’s PAT rose four-fold to Sh 2.6 billion and the dividend rising to Sh1 per share (+333 percent Y-o-Y). Shri Krishna (+99 percent M-o-M) and Kenya Orchards (+45 percent M-o-M) also recorded notable gains, driven by increased retail activity.
Equity Group rose 8.4 percent following its 1H26 results, which is a PAT +32 percent Year-on-Year (Y-o-Y), while KCB gained 9.3 percent ahead of its book closure after announcing an interim dividend of Sh3 share (+50 percent Y-o-Y). Safaricom also gained 6.7 percent, further lifting the index.
NCBA says focus is likely to shift from earnings momentum to valuations following the 1H26 results season.
It adds that, while the 34.2 percent YTD rally leaves room for profit-taking, particularly in stocks that have moved ahead of fundamentals, the underlying earnings outlook continues to support equities.
The bourse has, for the first time, crossed a historic Sh 4 trillion mark, building on top of a highly successful previous year.
“The search for yield, particularly as fixed income returns decline with the easing cycle, remains a key driver of equities,” says the investment bank.
Leave a comment