More than half of stock prices at the Nairobi Securities Exchange (NSE) have yet to return to their pre-Covid-19 levels amid the full recovery of the bourse and economic revival from the pandemic-induced slump.

Of the 58 actively traded counters, 31 are trading below their closing price on March 12, 2020, when Kenya announced the first case of Covid-19 that pulled down the main market index to a 20-year low as investors dump stocks.

This emerged as the combined wealth of investors at the NSE grew Sh610 billion over the period.

Investors have become selective during the recovery and are putting money in companies that are viewed to be stable against the effects of coronavirus, rewarding stocks such as Safaricom , BAT and Equity.

Firms that have made positive corporate moves in the stock market such as bonus issuances and buyouts like Nairobi Business Ventures (NBV) have also recorded higher gains relative to peers.

But investors have punished top firms viewed to struggle under effects of Covid-19, including East Africa Breweries Limited (EABL) , Centum Investment , Kenya Power and Scangroup .

Depressed advertising spend has hurt Scangroup while lower electricity consumption and shortened business hours pummelled Kenya Power and EABL sales respectively.

“Value investors have concentrated on stocks with a good earnings potential, mainly Safaricom and banks. Speculative investors have also made handsome profits on counters such as Nairobi Business Ventures (NBV) ,” said Sarah Wanga, AIB-AXYS Africa head of research.

Safaricom’s share price has gained 62 percent since Covid-19 first hit Kenya in March 2020, closing at Sh41.80 a unit on Friday.

This gain has entrenched its position as the NSE’s dominant stock, accounting for 60 percent of the market’s total capitalisation or investor wealth that stands at Sh2.77 trillion.

Its stock appreciation came on the back of the telco paying total dividend of Sh1.37 per share for the year ended March 2021, amounting to Sh54.89 billion.

A consortium led by Safaricom aims to start operations in Ethiopia next year after winning a licence in May, further upping demand for the telecoms operator shares at the NSE.

Safaricom has been the standout stock among a group of blue chip counters that have defied the pandemic to either record gains or maintain their share prices, but banks have underperformed on reduced profits and failure to pay dividends.

Out of the 11 listed local banks, eight are still trading below their March 2020 prices, with the only gainers being Equity Holdings at 12 percent and KCB at 2.7 percent to Sh50.50 and Sh47.10 per share respectively.

National Bank of Kenya’s stock remains suspended following the lender’s takeover by KCB , while cross-listed Rwandan lender Bank of Kigali has gained 24 percent in the period.

Analysts say investors put their focus on other blue chips such as Safaricom and BAT whose business indicators were little affected by the pandemic, unlike banks where dealers fretted over their loan defaults that ravaged profits.

The pandemic forced lenders last year to boost their provisions for mounting bad loans, which followed layoffs and business closures in the wake of the pandemic.

Banks have showed strong recovery this year with their gross profits up 61 percent to Sh96.4 billion in the six months to June.

World Bank expects Kenya’s economy to grow by 4.5 percent this year as vaccinations and lockdown easing help it recover from a coronavirus-induced slump last year.

“Banks (stocks) have largely underperformed due to fears of a significant deterioration in asset quality, fears which have since not materialised, therefore, pointing to a significant recovery going forward,” said Sterling Capital analyst Davis Gathinji.

Corporate actions have also helped some stocks to gain while peers remain in the red.

NBV has benefited from the announcement of corporate deals, having been recently taken over by United Arab Emirates-based Delta International FZE.

The firm’s stock is the biggest gainer since March last year, having jumped from Sh0.60 to Sh7.17 a share.

Carbacid’s announcement of a bid to take over rival BOC Gases #BOC in November last year also helped push up its share price, and although the deal is now on ice it is still trading at a 45 percent premium on its March 2020 price.

The analysts expect that the market will eventually regain some equilibrium where price movement is more fairly distributed among the different stocks and market segments, backed by new products and a return to profitability for most companies.

Mr Gathinji, however, sees risk if the fiscal position of the government doesn’t improve, which could see a fresh attempt to reintroduce capital gains tax on stocks.

Listings drought

“This would serve to increase the cost of capital, thereby, dissuading investments into the broader stock market since only blue chip stocks would present the returns sufficient enough to justify investment, at least on a risk-adjusted basis,” he said.

The lack on new listings also remains an issue for the NSE, making it hard to resolve the problem of market concentration among the top four firms – Safaricom, Equity, KCB and EABL— which account for 78 percent of the investor wealth at the bourse.

Their dominance has seen institutional and foreign investors concentrate on trading on these counters to the detriment of other stocks which are then denied the demand and supply necessary to spur price changes.