Blue-chip stocks and listed State bonds have firmed their grip on a subdued market, with five equity counters now accounting for 70 percent of the total value in quarter two.
Capital Markets Authority (CMA) Soundness report shows Safaricom, Equity Bank, East Africa Breweries Ltd, Kenya Commercial Bank and Cooperative Bank had the highest concentration of the market over the last year.
“During the quarter, the top five companies by market capitalisation accounted for 70.80 percent, the highest in the last four quarters, confirming their dominance in the Kenyan securities market,” the CMA said.
In the first quarter the five companies made up 67.5 percent market capitalisation while in the last quarter of 2018 they comprised 65.8 percent of the market. Between July and September 2018, the five firms made up 68 percent of the market value.
Government securities on the other hand controlled 99.98 percent of the traded bonds’ market, dwarfing the dormant corporate bonds’ segment.
“The Authority has been actively promoting market diversification as a way of addressing this challenge. Market deepening function has been reorganised and strategic alliances leveraged to facilitate uptake of new products and especially bringing to the market large cap entities to reduce market concentration,” the CMA said.
Market capitalisation—calculated as share prices multiplied by issued stock—which stood at Sh2.3 trillion in the first quarter slid 3.3 per cent to Sh2.2 trillion.
The benchmark Nairobi Securities Exchange index NSE 20 was down 7.4 percent, all share index down 5.1 percent while the volume of shares traded declined 16.5 percent from 1.6 billion in the first quarter to 1.3 billion in quarter 2.
Only the bond turnover increased by 24.8 percent from Sh161 billion to Sh201 billion but remained in the grip of Treasury bonds.
The government sought to raise Sh140 billion but received subscriptions worth Sh242.07 billion in the primary market. In the end, however, it accepted to issue bonds worth Sh157.82 billion, indicating a 65.20 per cent acceptance rate.
Corporate Bond turnover amounted to Sh34.76 million or 0.02 percent of total bond turnover.
CMA said it is implementing a hybrid bond market model that will allow trading of bonds both on and off the Exchange.
The authority also hopes the recent establishment of the Kenya Mortgage Refinancing Company (KMRC) will enable bond market deepening after it leverages on capital markets to raise funds through bonds for on-lending to banks and other mortgage financing companies.