Three stocks account for 92.3% of the Ksh199.12 billion appreciation of all shares at the Nairobi Securities Exchange (NSE) in 2021, registering a combined gain of Ksh183.36 billion.
Safaricom, East African Breweries Limited (EABL) and BAT are responsible for what looks like a bull run at the bourse, with the blue chip stocks dominating the rally.
Market-leading telco Safaricom alone accounts for 80 per cent increase in investor wealth at the NSE in 2021, and recorded the biggest absolute gain in market capitalization at Ksh160.26 billion.
The Capital Markets Authority (CMA) has previously flagged as a big risk the dominance of five companies at the bourse, including Safaricom, due to their influence on key market indicators. The performance of a handful of firms essentially determines the performance of the market, creating a problem for investors looking to measure the true performance of the bourse.
According to analysts, investors in 2021 have been snapping up stocks of companies capable of weathering the economic storm occasioned by the Covid-19 pandemic. The companies notably also have a tradition of paying dividends.
With a return of 21 per cent, cigarette manufacturer BAT is the biggest gainer at the bourse in 2021, with its shares closing at Ksh437 a piece on Wednesday, February 17.
Alcohol and beverages manufacturer EABL saw its share rise 13.2 per cent to Ksh174.50, while Safaricom gained 11% to Ksh38.25 in the period under review.
Safaricom’s strong performance in 2021 has been attributed to the end of M-Pesa fee waivers at the start of the year. Emergency measures introduced by the Central Bank of Kenya (CBK) at the onset of the pandemic had seen mobile money transactions of Ksh1,000 and below made free.
The company also recently announced its first ever interim dividend of Ksh0.45 per share.
Investors at the bourse will be counting on the global distribution of the vaccines to strengthen economies and shore up gains.
With government restriction measures being gradually eased, analysts expect EABL sales to bounce back in coming months. The firm has been supporting bars and eateries to stay afloat with their ‘Raising the Bar’ recovery fund and program.
Pressure has notably also been piling on the government to end the curfew, with stakeholders in the multi-billion nightlife industry agitating for increased hours of operation for bars and restaurants and promising compliance with Covid-19 measures.
As for BAT, it’s dividend policies have been a factor. The company has traditionally paid almost all its net earnings to shareholders.
It paid an interim dividend of Ksh3.50 from its half year to June 2020, when it recorded a 5.9 per cent net profit increase to Ksh2.6 billion.