Monday, April 26, 2010

NSE @ 6,000 a possibility in 2011

In 2007, when the NSE last reached 6,000, Kenya's economy was growing at around 7%. 2008 was 2-3% and 2009 was similarly anaemic. This year, God's favor in form of good and continuous rains mean that we are almost guaranteed 4-5% growth this year. Next year, with God's favor with the rain, we can touch 7% again assuming that we don't get into any early 2012 political skirmishes.

Because we never entered a recession in 2008-9, the economy has continued to grow and thus I believe we are poised higher in the NSE.

The private sector manufacturer and service firms should be announcing firmer or better than expected results for Q1 2010. By extension, financials which took non-performing loan hits due to PEV in 2008 and drought in 2009, will now see the upside in their balance sheets for which they've been restrained in growing.

All the above, plus the artificially lowered lending rates portend a higher NSE.
The key supporting point is 4,800 which we need to touch in 2010 so we can launch higher in 2011.

Which stocks?
Equity- we all acknowledge the step into IB was unclever. Not so Uganda and South Sudan businesses. Uganda ofcourse has oil and despite M7's re-election in 2011, its economy will continue a north-bound journey. South Sudan goes for a certain independence referendum in 2011. Both will support the upturn in Kenya's economy still Equity's bread and butter.
Centum- I think its a transformative time for this investment firm and James Mworia hasn't put a foot wrong yet. Getting into Carbacid when he did and breaking its logjam to allow trading resumption at NSE was a masterstroke. Exiting RVR and writing off the investment in advance all mean good thangs for full year 2009/10 (announcement due soon) and going forward.
I also fancy some manufacturing exposure to the likes of Crown Berger, Carbacid all which do well in an upturning economy.

Downside risks: as mentioned, any early 2012 campaigns will remind investors (specifically foreigners) that a new leader is due in 2012 and create tension. Another drought will have a similar impact to 2009.


Ssembonge said...

I met James Mworia last year and I did not realize that we knew each other - long story. Good to hear he is on the right track.

Maishinski said...

Am still maintaining my 2010 watchlist:

1. Kengen - for long term strategic gains

2. KQ - for big mid-term strategic gains gains

3. SCOM - for short term tactical gains

4. At least one Agriculture stock with sufficient volumes (still researching).

The hardest thing to do is to know when to exit. Getting in is easy... at some point a margin of safety cushions your risks...

But when do you get out??? People have been known to exit at 200% only for a stock to jump to 1000% gains in less than a year.

Or to hold at 200% gains only for the stock to fall back to give paltry 5% capital gains then staying in low range for many years...

Seenath Kumar said...

Really thanks for sharing this analysis. Hoping to get more updates.
Mutual Funds in India

Kamaa said...

What about Mumias & EA CAbles which currently is undervalued...?