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The Trading Room: Weekly Market Review – Week 13, 2020

Stocks across the globe fell on Friday after a historic three-day run-up, as skittish investors kept indices on track for their worst monthly and quarterly performances since 2008. Uncertainty over the overall human and economic toll was reflected in financial markets. MSCI’s gauge of global stocks rallied by the most in any week since December 2008, but is also poised for its largest month- and quarter- drops since 2008, during the height of the financial crisis.

The Dow Jones Industrial Average fell 915.39 points, or 4.06%, to 21,636.78, the S&P 500 lost 88.6 points, or 3.37%, to 2,541.47 and the Nasdaq Composite dropped 295.16 points, or 3.79%, to 7,502.38. The pan-European STOXX 600 index lost 3.26%, and MSCI’s gauge of stocks across the globe shed 2.39%. Emerging market stocks lost 1.03%.

Stock markets had rallied over the past week on trillions of dollars of economic stimulus enacted or pledged by policymakers worldwide, from central banks to governments. More may be needed as the virus slams the brakes on economic activity and increases healthcare spending.

The euro was up 0.97% to $1.1135, the Japanese yen strengthened 1.49% versus the greenback at 108.00 per dollar, while sterling was last trading at $1.2447, up 2.02% on the day. Benchmark U.S 10-year notes last rose 1-9/32 in price to yield 0.6778%, from 0.808% late on Thursday. The 30-year bond last rose 3-24/32 in price to yield 1.2555%, from 1.395%.

Oil prices extended their fall on demand concerns as the virus slowed economies to a crawl, which outweighed the stimulus efforts. U.S. crude recently fell 3.98% to $21.70 per barrel and Brent was recently at $24.83, down 5.73% on the day.
Gold market participants remained concerned about a supply squeeze after a sharp divergence between prices in London and New York. The virus has grounded planes used to transport gold and closed precious metal refineries. Spot gold dropped 1.0% to $1,613.02 an ounce. The metal posted its largest weekly advance since 2008.
 

Index

Friday’s Close Week’s Change % Change YTD
DJIA 21,636.78 2462.80 -24.18%
S&P 500 2,541.47 236.55 -21.34%
NSE20 1917.67 107.64 – 5.31%
S&P MidCap 400 1,420.28 162.42 -31.16%
Russell 2000 1,131.93 117.88 -32.16%

Weekly turnover of the Nairobi Securities Exchange declined a further 15.60 percent, closing with a week’s turnover of Kes.3.95 Billion, down from the Kes 4.68 Billion recorded last week. Similarly, volumes traded on the market had a drop, closing the week with 140.6 million shares exchanging hands, a 6.27 percent decline in volumes as compared to 150 Million shares traded the previous week. As markets shifted, new gainers emerged on the market. Longhorn publishers closed the week at Kes 4.94 per share,an equivalent of 11.76 percent rise from last week’s close of Kes 4.42 per share. Following Longhorn was Absa New Gold, the only Exchange Traded Fund in the NSE, closing 9.06% higher at Kes 1,625.00, backed by the rise in value of the underlying instrument, Gold. Bamburi Cement & BOC Kenya came in third and fourth, gaining 8.93% and 7.83% respectively.

On the losers side, blue-chip counters continued to dominate the space as the decline in prices hit on Insurance, Manufacturing and the financial service providers. Notably, Jubilee Holdings closed 15.54% lower at Kes 250.00 per share against 296.00 where it was trading on Friday last week. For the second week running, East African Breweries was on the receiving end of the market a hit as well, shedding off 15.07% in market value and closing at Kes 135.25 per share.  TPS Eastern Africa, the group that owns Serena Hotels closed 14.89% lower at Kes 12.00 followed by Equity Group with a price decline of 14.76% at Kes 33.20 per share.

The week ahead will be tough on the market, it is now clear that the country will face an economic downturn from the corona virus. Various businesses will be affected by the dusk to dawn curfew which is being implemented by the country. This will mean reduced cash-flow for most businesses will be affected. The COVID-19 scare has also raised an alarm on local investors who have for the past two weeks played a defensive game on stock prices. With locals retracting from the market, prices could slump further. Again, foreign dominated counters have the highest exposure to continued foreign sell-off. Another factor to consider is that the IMF yesterday announced that the global economy had slipped into a recession, warning that it could be far worse that of the 2008 financial crisis. Some fundamentals of the companies may be affected, however, investors can take advantage of stocks trading at discounts and average down on their portfolio.

Here’s how the NSE Indices performed during the week:

  • The NSE 20 share index shaved-off 107.64 points or 5.31% to settle at 1917.67
  • All Share Index (NASI) shed 5.63 points or 4.24% to settle at 127.30.
  • The NSE 25 Share index was down 228.57 points or 7.09% to stand at 2995.86.
  • The FTSE25 Kenya share index  declined by 12.39‬ points or 6.92% to close Friday at 166.78.
tvc_9b61cc8109a2db643d3c50bd568caa0d.png (1299×580)
NSE 20 One year share performance chart.

The NSE’s Derivative Market [NEXT] closed the week with a total of 5 contracts worth Kes.131,000 transacted. The Safaricom contract expiring in 18th June 2020 had 4 contracts valued at Kes.99,000 transacted. This is a decline in volumes and turnover from the 65 contracts worth Kes.2.55M transacted the previous week.

The secondary Bond Market registered a reduction in activity with bonds worth Kes.11.7 Billion transacted compared to Kes.14.6 Billion registered the previous session. The FTSE NSE Kenya Govt. Bond Index closed the week at 96.49 basis points.