Things have been interesting at the Nairobi Securities Exchange, where some stocks’ values have fallen dramatically over the past year.

The securities exchange is a wealth creation machine, allowing investors to own shares of very profitable companies and share the profits through dividends and growth through capital appreciation.

Analysts say now is the best time to secure the value stocks as they are trading at discounts to their intrinsic value.

For instance, Safaricom, which once accounted for 61 percent of the total bourse value, has seen its value fall by about 58 percent from Ksh1.8 trillion in August 2021 to Ksh759 billion by third week of March 2023.

At the beginning of the year, by January 18, Safaricom’s share price had touched a low of Ksh20.60, sending the company’s value to Ksh825.35 billion, which was the lowest in 69 months. On April 14, the Safaricom share price was further down to Ksh17.80.

As a result of this, local investors are being encouraged to take advantage of the current situation.

The Safaricom stock is heavily in the hands of foreign investors and a jump in interest rates in developed economies like the United States and other Western countries cut the attractiveness of equities in the emerging markets like Kenya. Foreign investors are liquidating their positions at whatever price to build buffers by selling off in frontier and emerging markets.

Emerging markets include countries that are in the process of becoming a developed economy; frontier markets are less advanced economies in the developing world. Kenya is a frontier market.

Analysts attribute the sharp decline in the performance of Safaricom’s share price to higher exits by foreign investors who are now pricing in a deeper recession in the global economy than previously projected. A deep recession implies a steep drawdown (a decline in an investment) in stock prices in 2023.

They concur that this is not only a Safaricom issue but an emerging and frontier market issue. The consensus is that the recession is now going to be more severe than was previously expected. They further say expectations on further interest rate hikes in advanced economies including the US have rekindled the reversal of portfolio flows by foreign investors to home markets driving down valuation of stocks and bourses in emerging and frontier markets.

Analysts from Genghis Capital are advising investors to increase their positions on the counter and take advantage of the current discounted prices.

“From our valuation and forecasts, we see long-term value in the stock. This is on the back of favourable discounting on the Ethiopian business, positive cashflows that will weather the current macro economical storm, and its promising growth prospects,” the researchers said in their weekly note.

Analysts from NCBA Investment Bank said the telco’s revenue in the first half of the year included Ksh9.1 million from Ethiopia, generated in the first one month since the beginning of the network roll out plan. This diversification strategy could help Safaricom achieve revenue expansion above consensus and entrench the company’s presence in the region. “We maintain a cautiously optimistic stance on this diversification,” they stated, adding that, “We maintain the view that Safaricom is well positioned as a strong player in the country’s mobile telecommunications industry.”

In February, the telco declared an interim dividend of Ksh0.58 per share following steady revenue growth and additional income from Ethiopia.

Safaricom share price is usually the most impacted NSE stock when foreigners flee, boasting of both the highest market capitalisation and equity turnover according to a recent market report.

Latest data shows that Safaricom had an average turnover of Ksh2.462 billion between October and December 2022, while its average market capitalisation stood at Ksh982.94 billion.