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Daily Market Report – 5th August 2020


Faida Research - August 6, 2020 - 0 comments

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Market Commentary:

  • The All Share Index and NSE 20 Index eased by 0.9% and 1.8% to close the day at 127.01 and 1,762.28 respectively as selling pressure persisted across the bourse. Market turnover declined by 17.4% to KES 676.1 million.
  • Safaricom (-0.9% to KES 26.15) was the top traded counter, accounting for 86.3% of the day’s traded value. I&M Holdings emerged the top gainer (+3.9) to close at KES 46.75 while Bamburi was the top loser, shedding 8.8% to close at KES 25.55.
  • Barclays New Gold ETF (Exchange Traded Fund) closed at an all-time high of KES 2,040 (YTD +38.8%). This comes as globally, spot gold rose to a record above $2,000 an ounce, amid economic and geopolitical risks. Demand for the ETF has been driven by the need to hedge against risky portfolios within the NSE (especially as the equities market faces a bear run), with gold considered globally a safe haven. ETFs have enabled retail and institutional investors to trade in gold without needing to take physical delivery of the metal

 

News Highlights:

Telkom Kenya Calls off Merger with Airtel Kenya limited

 Telkom Kenya has called off its merger with Airtel Networks Kenya Limited in a mutual agreement.
 The company cited challenges experienced in getting approvals required to complete the transaction.
 Telkom Kenya will now focus on further accelerating its digital transformation to capture emerging shifts brought about by the pandemic.

Commentary
 The failure of both companies to merge will deny both companies economies of scale. We are therefore unlikely to see any meaningful change in the competitive landscape from the legacy players.
 Although a weaker competitive landscape favours Safaricom in terms of retaining its market leadership position, we may see a resurgence of calls for the regulator to address the company’s dominant position in the market.

 

Recommendations:

Long Term Buy- KCB, Equity, Absa, Stanbic, NCBA

Hold- Safaricom

Sell- Stanchart, Bamburi, HF

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