If you are an investor in Equity bank shares, start planning an exit strategy

Source: Soko Analyst

If you are an investor in Equity bank shares, plan an exit strategy

If there was a time when investing at the market was something at its optimal best, the time has been the last 3 weeks, when foreign investors have been taking up key positions on very lucrative bargains on key shares that will definitely give them optimal returns in the next coming weeks.

The unfortunate twist to this despite the fact that they have lifted the 20 share index of the NSE is that local investors have bailed out or sold their options to them. Banking stocks have been of keen interest to the foreign investors given the set of fundamentals that these stocks have been exhibiting and the fact that all of them just released their last quarter’s financial results.

As banks have very different operating structures than regular industrial companies, it stands to reason that investors have a different set of fundamental factors to consider, when evaluating banks. This is not meant as an exhaustive or complete list of the financial details an investor needs to consider, when contemplating a bank investment.

These are technical aspects of evaluating a banking stock and in my analysis, I always try to omit these facts because the Kenyan NSE does not operate on key fundamentals but rather human emotion of the investors at the behest of current affairs in the industry.

Equity as of today saw a  demand  of 2,673,500  shares against a supply  of 1,508,600 resulting to a best bid of 23.50 and best as of 26.50 to close at 24.50 per share with zero per cent change on the price compared to the previous day with a turnover of 149,098,496 and 105 deals as of 1513 hours today. The increased demand was from foreign investors and this will continue for the rest of the week as they look for the perfect pendulum moment to settle and ensure a balanced trade on the stock.

This is because of the just released results and the fact the CEO has been in the news for the last two months for all the right reasons, giving the brand an emotional endearment to its investors. Especially after the CEO was named the business person of the year, coming on the heels of a serious social responsibility venture that the bank has embarked on in terms of raising an army of young trained entrepreneurs and a changed and better exposed new board room members and a new CEO.

These factors have seen the stock become very valuable in the eyes of the foreign investors however, every good thing reaches its plateau curve and equity has reached its curve. It’s time to sell and relocate the funds to other stocks. Equity won’t surpass the 31 KES per share mark given the fact that the results released have shown a decline in profits for the first time in a long time. Banks like KCB have come and overtaken it in this department. Not to mention that it’s been found to be the most expensive bank to get a loan especially for its target client.

Also working negatively on the share is the perceived rumor that the bank has the support of the government in its operations and that’s why it’s done well and that any change in an administration that won’t seat well with its ideology might just impact its performance in a serious negative way.

In addition, it’s the one bank that has stalled on innovative ways to keep attracting the target market through mobile innovation.

Our analyses for further action on this is that if you have shares here, then plan an exit in the next one month, if you interested in getting in, then get in now with the aspect of large volumes to benefit from the action of marginal trade. In the next month, the stock will hit plateau horizon and be there for the next 6 months until after elections are done.