NSE Market Cap Hits Historic KSh 2.6 Trillion

The Nairobi Securities Exchange (NSE) has concluded a week of extraordinary gains, with market capitalization soaring past the KSh 2.6 trillion mark for the first time since February 2022. This rally, fueled by a potent combination of strong corporate performance, robust dividend announcements, and a resurgence of foreign investor confidence, has seen key indices hit multi-year and even all-time highs. The market’s resilience and broad-based strength signal a new era of optimism for investors in Kenya and the broader East African region.

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A Historic Rally: Understanding the Key Indices

The recent market performance is best understood by looking at the movements of the NSE’s key indices, which serve as crucial barometers for the overall health of the bourse. Each index tracks a different segment of the market, providing a nuanced view of the rally’s breadth.

The NSE All Share Index (NASI), which represents the total value of all listed companies, closed at 165.66, reaching its highest point since February 21, 2022. The fact that the NASI is leading the charge highlights that the rally isn’t just confined to a few dominant stocks; rather, it reflects a broad-based positive sentiment across the market.

The NSE 20 Share Index (NSE 20) rose to 2,670.48, a level not seen since January 15, 2020. This index is a price-weighted index that tracks the performance of the top 20 best-performing companies at the NSE, selected based on key trading activity measures such as market capitalization, shares traded, liquidity (number of deals), and turnover. These constituent companies are often considered the “blue-chip” stocks, representing established, profitable entities with a solid dividend history. The impressive performance of this index signals that the market’s largest and most influential companies are the ones driving the momentum.

The NSE 25 Index, which is designed to be a more representative index of the market by including the top 25 stocks based on market capitalization, closed at 4,279.56, a level last reached on August 30, 2018. This is a significant milestone, showing that the growth extends beyond the top 20 and into other highly-valued companies.

Finally, the NSE 10 Index, a newer index introduced in September 2023, hit a new all-time high of 1,635.00. This index tracks the top 10 stocks and its creation was a strategic move by the NSE to provide a more concentrated measure of performance for the market’s most prominent and highly liquid counters. Its rapid ascent to a record high in less than two years of existence underscores the incredible bullish run in the market’s premier stocks.

This is a stark contrast to the market’s performance in recent years. Following the peaks in late 2018 and early 2020, the NSE experienced a prolonged downturn, exacerbated by the global economic uncertainty, the COVID-19 pandemic, and domestic economic challenges. The current rally represents a significant and decisive turnaround, fueled by a renewed sense of stability and confidence in the Kenyan economy.

The Macroeconomic Engine: Fueling the Bull Run

The market’s performance is not happening in a vacuum; it is underpinned by a more stable and encouraging macroeconomic environment. Several key factors have contributed to this positive shift:

1. Inflation Under Control: After peaking in late 2022, inflation in Kenya has been on a consistent downward trajectory, falling within the Central Bank’s target range of 2.5% to 7.5%. This has allowed the Central Bank of Kenya (CBK) to adopt an expansionary monetary policy, leading to a series of interest rate cuts.
2. Easing Interest Rates: The central bank has been cutting its policy rate, which has had a significant impact on financial markets. When interest rates on fixed-income assets like government bonds and Treasury bills decline, investors seek better returns elsewhere. This capital naturally flows into the equities market, where the potential for higher returns and dividend yields becomes more attractive.
3. Appreciation of the Kenyan Shilling: The Kenyan shilling has been one of the best-performing currencies in Africa in 2024 and 2025. This stability is a major confidence booster for foreign investors, as it mitigates currency exchange risk. A stronger shilling means foreign capital invested in Kenyan stocks will not lose value when converted back to foreign currency.
4. Resilient Economic Growth: Despite various global and regional shocks, the Kenyan economy has demonstrated remarkable resilience. A strong performance in the services sector, a rebound in agriculture, and continued growth in financial and telecommunications sectors have all contributed to a projected GDP growth of over 5% in 2025. This robust economic backdrop provides the fundamental basis for companies to thrive and generate profits.

These interconnected factors have created a favorable climate for equities, making them an attractive alternative to traditional, lower-yielding fixed-income investments.

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Corporate Giants Lead the Charge: A Deep Dive into Earnings

The rally is not purely speculative; it is firmly grounded in the strong financial performance of key listed companies. The first half of 2025 has seen several firms announce impressive results, providing concrete justification for the increase in their share prices.

KCB Group

KCB Group has been a standout performer, with its share price rally supported by two major announcements. The banking giant reported a record half-year profit, which rose 8% to KSh 32.33 billion. This was driven by a robust growth in its loan book and improved performance across its regional subsidiaries. In a landmark move, the bank declared a mid-year dividend of KSh 4.00 per share, which was split equally into an interim payout and a special dividend. This special dividend was a direct result of the successful sale of its stake in the National Bank of Kenya. This not only rewarded shareholders but also signaled the bank’s strong capital position and strategic financial management. KCB’s total equity crossing the KSh 300 billion mark to KSh 306.8 billion is a first for any bank in East and Central Africa, cementing its position as a financial powerhouse.

BAT Kenya

The British American Tobacco Kenya (BAT Kenya) share price has been on a bull run, buoyed by the company’s interim dividend announcement. The board approved an interim dividend of KSh 10.00 per share, a significant increase from the KSh 3.50-5.00 range it had maintained for years. This more than doubled the previous year’s payout. The decision was backed by a 40% increase in half-year profit after tax, which reached KSh 2.98 billion. This impressive performance was attributed to prudent cost management and stable domestic sales, which compensated for challenges in its export markets.

Car & General Kenya

Perhaps the most astonishing story of the earnings season belongs to Car & General Kenya. The company reported a staggering 920% surge in profit after tax for the first half of 2025, reaching KSh 637 million from KSh 62 million in the previous year. This phenomenal growth was driven by a significant increase in motorcycle sales in Kenya and the robust performance of its subsidiaries, particularly in phone financing and two- and three-wheeler sales in Tanzania. The company’s board approved an interim dividend of KSh 0.30 per share, which was its first in over two decades, further exciting investors and demonstrating the board’s confidence in the company’s sustained profitability.

These individual company success stories have created a ripple effect, attracting both local and foreign investors who are looking for undervalued stocks with strong growth prospects and attractive dividend yields.

Market Reforms: The Impact of the Single-Share Rule

The NSE’s rally is also a testament to the success of market reforms aimed at deepening retail participation. The most significant of these is the single-share rule, which was implemented on August 8, 2025. This groundbreaking reform eliminates the previous minimum trade size of 100 shares, allowing investors to buy and sell in single units.

Previously, the “board lot” of 100 shares was a major barrier to entry for small-scale investors. For highly-priced stocks like Safaricom or British American Tobacco, purchasing 100 shares could require a substantial capital outlay, often amounting to tens of thousands of shillings. This effectively priced out a large segment of the population, particularly the youth and first-time investors. The alternative, the “Odd Lot Board,” was illiquid and inefficient, with slow transaction times and wide price spreads that made it unappealing.

With the new rule, all transactions, regardless of the number of shares, are now executed on the main order book. This not only improves liquidity but also ensures that the true market price of a stock is reflected by all trades. The NSE’s move is a strategic part of its 2025-2029 plan to increase the number of active investors from 2 million to a target of 9 million by 2029. By making it easier and cheaper for ordinary Kenyans to participate, the NSE aims to democratize investment and create a more robust, liquid, and inclusive market. The surge in market activity since the rule’s implementation suggests that it is already having the desired effect.

The Road Ahead: Outlook and Potential Challenges

The outlook for the NSE remains positive, with analysts pointing to continued macroeconomic stability and strong corporate earnings as key drivers. Foreign investors have shown a consistent return, with net buying for two consecutive weeks and a notable increase in their participation in the market. The improved liquidity and easing interest rates are making equities a more compelling proposition than fixed-income assets, leading to a sustained shift in capital.

However, the market is not without its risks. The global economic landscape, potential shifts in monetary policy, and domestic political uncertainties could pose challenges. Kenya’s public debt burden, while currently managed, remains a long-term concern. Furthermore, a potential uptick in global interest rates could make developed markets more attractive for foreign capital, leading to outflows.

For now, the momentum is firmly in favor of the bull run. The combination of strong fundamentals, proactive market reforms, and renewed investor confidence has created a perfect storm for growth. The NSE is not just a barometer of the Kenyan economy; it is a key engine driving its transformation and offering unprecedented opportunities for investors. The current rally is a powerful signal that Kenya’s financial market is coming of age and is ready to compete on the global stage.

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Photo source: Google

By: Montel Kamau

Serrari Financial Analyst

18th August, 2025