Safaricom value dips after US rate hikes
Wednesday October 05 2022
The value of Safaricom at the Nairobi bourse has dipped below the Ksh1 trillion (about $8.2 billion) mark on foreign investors’ flight in the wake of rate hikes in the US. PHOTO | FILE
The value of Safaricom at the Nairobi bourse has dipped below the Ksh1 trillion (about $8.2 billion) mark on foreign investors’ flight in the wake of rate hikes in the US.
The telco was yesterday valued at Ksh979.60 billion ($8.1 billion) after its share price dipped to Ksh24.45 ($0.20) from a high of Ksh38.15 ($0.32) at the start of the year, translating to a paper loss of Ksh548.9 billion ($4.5 billion) over the period.
The plunge in the firm’s share price hit the valuation of Nairobi Securities Exchange (NSE), with market capitalisation falling below the Ksh2 trillion ($16.5 billion) mark that is similar to market performance when Kenya was battling Covid-19 restrictions like the nationwide curfew, which delivered layoffs, job cuts and business closures.
Safaricom, the country’s most profitable company, accounted for 82 percent of the NSE paper loss of Ksh662 billion ($5.4 billion) since the start of the year, underlining its dominance that is making it difficult for investors to gauge the performance of the bourse.
The bourse is being weighed down by a reduced appetite for emerging markets after a jump in interest rates in the developed markets such as the US, which are currently battling high inflation that has forced their central banks to adjust rates upwards.
The Federal Reserve on September 21 announced a third consecutive 0.75 percentage point increase in interest rates and signalled borrowing costs would remain high for an extended period.
The US central bank lifted its main interest rate to a range of 3.0 per cent to 3.25 per cent.
Smaller markets like the NSE have taken deeper hits because investors, particularly foreigners, get attracted to the western bonds and equities that are viewed as safe havens in times of global uncertainty.
This flight of capital to the US market — where inflation is at multi-year highs — has triggered price falls of blue-chip firms such as Safaricom, Equity Group and East Africa Breweries Limited (EABL) that are a favourite of foreign investors.
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