Shares of smaller firms outperformed blue chip firms in the first quarter of 2025 as speculative trading continued to dominate, pushing market growth six percent.
Four of the top five counters were small caps. TransCentury Plc led the pack in the quarter as its share price rose 233 percent to Sh1.26 from Sh0.39 at the end of 2024.
East African Cables Plc jumped 106.4 percent, Uchumi Supermarkets Plc 105 percent and Home Afrika 105 percent.
Small cap stocks in Kenya refer to shares of companies with relatively low market capitalisation or a valuation of less than Sh4 billion.
The Nairobi All Share Index (Nasi) was up 5.9 percent in three months ended March 31, 2025, as investor wealth rose by Sh117 billion in the quarter.
But blue chip firms trailed the smaller firms on capital gains, registering single digit growth during the quarter.
Safaricom, which is the largest counter at NSE, posted a gain of 7.3 percent to trade at Sh18.30.
Tobacco firm, BAT, dipped 1.2 percent, East Africa Breweries Limited (EABL) rose 2.5 percent and Equity Bank declined 2.4 percent
Analysts have previously attributed the rise in the small caps to low nominal prices which have attracted speculators looking to replicate the big gains of nearly 300 percent seen on counters such as East Africa Portland Cement Company Plc, Kenya Power, KenGen, KCB and I&M Group.
Speculators, who are mostly retail or individual investors, are largely attracted to small cap stocks due to their relatively low acquisition cost and the potential for price appreciation in multiple folds.
Small caps, world over, are more volatile and riskier investments compared to large caps.
NSE small caps have for instance been characterised by years of poor financial performance and governance, deeming any price rallies unsustainable.
Uchumi Supermarkets has for instance flaunted NSE listing rules by not disclosing its financial performance for more than half a decade while the retailer has been bankrupt for several years.
“Some look for the cheapest stocks and bet that they will appreciate, without considering that some of the companies are not fundamentally sound, and do not have physical operations,” senior research analyst at Capital A Investment Bank Ronnie Chokaa said in a previous interview.
Other counters that marked a gain of more than 50 percent in the quarter were Sanlam Kenya Plc, Unga Group, Liberty Kenya Holdings, HF Group Plc, Sameer Africa Plc and Kenya Power.
Only 18 of the 62 active stocks were trading at lower prices compared to the end of 2024 indicating the continuation of positive sentiments towards local equities at the start of the year.
Last year, the NSE rallied 34 percent driven by a mix of price gains on both small and large cap stocks including Portland Cement, Kenya Orchards, Kenya Power, I&M and KCB Group.
The NSE market capitalisation currently stands at Sh2.05 trillion, rising from 1.43 trillion and Sh1.93 trillion at the end of 2023 and 2024 respectively.
