NSE big five tighten grip on market during pandemic

The top five listed companies on the Nairobi Securities Exchange (NSE) have tightened their grip on the market during the stay of the COVID-19 pandemic to heighten market concentration risks.

According to data from the Capital Markets Authority (CMA) covering the third quarter of 2021, the total market share of the big five hit a high 80.61 per cent in the quarter ended in September.

Additional data from the CMA shows the big five stocks by market valuation as of the end of June are Safaricom, Equity, KCB, East Arica Breweries Limited (EABL) and the Co-operative Bank.

During the quarter, market leader Safaricom accounted for 60 per cent of the market share on some instances.

The grip of the big five on the NSE has grown considerably since the start of the COVID-19 pandemic in March last year with the concentration rate for instance standing at just 74.15 per cent in March last year.

In June last year, the concentration rate rose to 75.43 per cent and then hit 76.24 per cent in September 2020 before opening the year at 79.21 per cent in March this year.

The higher market concentration by the five signals increased activity specific to the top counters at the expense of the rest of the stock options.

Incidentally, four of the five including Safaricom, Equity, EABL and KCB also topped the market by average turnovers in the quarter to September.

As of June, the big five stocks were valued at Ksh.2.3 trillion or an equivalent 85.2 per cent of the entire Ksh.2.8 trillion NSE Equity market cap in the review period.

To tackle the growing market concentration risks, the CMA says it is seeking to attract large unlisted-companies to the bourse to spread the risks presented.

“The impending overhaul of the Public Offers Listings and Disclosure Regulations is expected to attract larger private sector corporates and small and medium enterprises (SMEs),” the regulator noted.