Make money from the stock market
Posted Wednesday, May 16 2012 at 15:20
The recent price rally on some of the counters at the Nairobi Securities Exchange is a call to investors, both retail and institutional, who hope to make good returns to put in their money.
Analysts say that nearly all indices have gone up since January, earning investors money.
They further indicate that the bourse is likely to recover by at least 30 per cent this year, given improving conditions in the economy.
“A lot of things have improved now, from recovery from a negative equity market seen in the last quarter of last year to what we are seeing now, to the slowdown in inflation and improving economic environment,” PineBridge Investments investment manager David Achungo told Money.
The NSE 20 Share Index, which tracks the performance of the most traded stocks, had regained 18 per cent of its value to 3628.64 points on Monday this week, up from its two-year low of 3070.36 points registered on December 6 last year.
Similar performance was last seen more than eight months ago.
This gives a strong indication of the recovery of the stock market, further attracting more investors intent on cashing in on the improving performance.
Some counters registered upwards of 40 per cent by mid this month since the end of last year.
For instance, KCB stocks, which were trading at Sh16.8 per share, had risen by 44.3 per cent at the close of trading on Monday.
An investor who bought 100,000 shares in December last year when the shares were at Sh16.8 earned Sh745,000 when the shares were selling at Sh24.25 on Monday, just five months later.
An investor who bought 100,000 Equity Bank shares when they were trading at Sh16.6 earned Sh390,000 this week, representing a 23 per cent rise.
But analysts say the situation requires a high risk appetite because if the reverse was true, the investor would have lost Sh745,000 in the case of KCB and Sh390,000 in Equity Bank shares.
Given rising risk appetite among investors on the stock market, the gains are expected to be even higher as the shares regain their real value and continue their upward movement.
“The past few months have seen substantial interest in the equities market, which has attracted many local and foreign investors.
“Given the expectation of higher returns compared with other investments like Treasury bills, the risk appetite for the equity market has increased,” Mr Achungo said.
An investor who invested Sh1.68 million in the 182-day Treasury bills at the rate of about 20 per cent towards the end of last year, or in January this year, is set to earn Sh336,000 after six months.
If the same investor was to put the same amount in the 183-day Treasury bills, attracting about 11 per cent returns as at last week, he is set to earn Sh184,800 after six months.
The performance of the stock exchange over the past few months has seen the bourse rise over 18 per cent, surpassing the Sh1 trillion-mark in investor wealth.