A record market, carried by six names

One stock is more than a third of the market

Safaricom's KES 1.54 trillion capitalisation is about 37% of the exchange's KES 4.17 trillion. The next five names — Equity, KCB, EABL, Co-op and Absa — add roughly KES 1.35 trillion between them. Six securities out of seventy-one carry roughly two-thirds of the market's value.

That concentration is the single most important fact about the NSE as an index. The all-share index is not a read on seventy-one Kenyan companies; it is mostly a read on one telco and five banks, and it moves when they move.

The re-rating has been led by banks, not by the telco

Over the past ninety days KCB is up about 41%, Equity about 36%, EABL 21%, Safaricom 21%, Co-op 19%. Standard Chartered, already the most expensive bank on a per-share basis, has added under 3%.

The pattern is a market repricing bank earnings after a rate-cutting cycle rather than chasing a growth story. Cheaper money lifts loan books and lowers the discount on future earnings, and Kenyan banks entered the cycle trading well below their historical multiples.

The macro backdrop is doing the work

The Central Bank Rate sits at 8.75% and has been held steady, well down from the tightening peak. The shilling is trading near 129 to the dollar and has been unusually stable — and unlike the Ethiopian birr, there is no meaningful parallel market to track alongside it.

A stable currency plus falling policy rates is the classic setup for a domestic equity re-rating, and that is close to what the last two quarters have delivered.

After a 40% run, the banks are still trading at or below book

This is the number that matters. KCB earns 19.3% on book and trades at 0.89 times it. Equity earns 25.2% and trades at 1.22 times. Co-op, NCBA and I&M sit between 1.16 and 1.30 times book on returns of 16 to 19 percent. On the arithmetic alone, a bank compounding book value at close to twenty percent a year while changing hands at book value is cheap, and a ninety-day rally of thirty-five to forty percent has not made it expensive.

The market is discounting something. The usual candidates are concentration of the loan book in government paper, the shilling, the thinness of the market itself, and the reality that a foreign buyer of these shares takes on exit risk that does not show up in any multiple. Whether those risks justify a bank on nine-tenths of book earning nineteen percent is the open question — but it is now a question about risk, not about price.

The contrast at the top of the market is stark. Safaricom trades at 7.5 times book and 15.8 times earnings, earning roughly 48 percent on attributable equity. EABL is on 15.3 times earnings. Investors are paying a large premium for the two non-bank franchises and almost nothing for bank equity.