The New NSE Reality: Profits, Dividends, Price Spikes… What’s Really Going On?

What To Do When You Bought NSE Shares Low and the Market Is Now at Its Highest

The Nairobi Securities Exchange (NSE) has entered one of its strongest recovery phases in recent years. Investors who bought shares during the deep bearish period of 2020–2023 are sitting on substantial unrealised gains. Many companies are now reporting profits, and dividends — such as newly announced interim payouts — have renewed market excitement.

At the same time, ETFs like SMWF and GDL are rising far faster than their underlying indexes, mainly due to demand and supply pressure, not fundamental global market moves.

This article breaks down what investors who bought low should do, why the market is suddenly extremely active, why some stocks are exploding in price, and whether this trend can continue.

🟦 1️⃣ Why the NSE Is at Multi-Year Highs

Reason 1: Return of Foreign Investors

After years of selling (2020–2023), foreign investors have re-entered the NSE due to:

• improving economic stability
• strengthening shilling
• declining global rates
• deeply undervalued local shares
• improved credit outlook

Foreign participation, especially in banks, telcos, manufacturing, and select large caps, has boosted demand and pushed prices higher.

How to confirm this (very important):

Most online trading platforms display foreign buys and foreign sales for each stock and sector. This helps investors track:

• which counters foreigners prefer
• where foreign  buying and selling is happening
• sector rotation among foreign funds

This data is openly available inside the watchlist and sector statistics of online platforms.

Reason 2: Surge in Local Retail Activity + Effects of 1-Share Rule

The “1 share minimum rule” introduced by the CMA and NSE drastically changed trading dynamics:

✔ Increased liquidity and participation
More Kenyans can now trade with as low as one share, leading to:

• increased retail orders
• higher daily transaction counts
• broader participation across age groups

✔ Narrow spreads on some counters
With more buyers and sellers participating, bid–ask spreads tightened on many stocks—creating faster price movement.

✔ Some stocks frequently hitting the 10% daily limit
The NSE has a 10% maximum daily movement rule. This rule is now being hit more often because:

• high retail demand + low supply
• increased foreign buying
• smaller free-float in some counters
• PR-driven momentum (after profits/dividends)

Once the 10% limit is hit, supply is blocked for the day, but demand continues to queue → forcing a price spike the following day.

❓ Could we see this with Co-op now that it has announced interim dividends?

Yes — and here is why:

• Dividend announcements attract both dividend investors and short-term traders
• Foreign investors also react to strong bank earnings and stability
• Retail participants aggressively buy banking stocks after dividend news
• Supply becomes tight because long-term holders don't want to sell
• If demand overwhelms supply, the stock can hit the 10% upper limit, causing a multi-day upward momentum

In short: The combination of dividend news + high demand + limited supply + the 10% rule can easily result in sharp price spikes. This is the same pattern seen in other recent surges.

🟩 2️⃣ Why Many Companies Are Suddenly Reporting Profits and Dividends

It looks sudden—but the reasons are structural.

✔ The past 4–5 years were abnormally tough
Companies suffered from:

• Covid-19 disruptions
• interest rate hikes
• FX losses
• inflation
• slow credit growth

Now that the economic cycle is stabilizing, earnings are bouncing back.

✔ Cost-cutting is now showing results
Many firms reduced:

• staff
• branches
• debt
• operational expenses

Slight revenue growth now translates into large profit jumps.

✔ Sector recovery is synchronized
Financials, manufacturing, energy, utilities, and services are recovering at the same time.

✔ Fear has turned into confidence
When investors believe the worst is behind them, valuations adjust quickly.

🟦 3️⃣ Why ETFs Like SMWF and GDL Are Driven More by Hype Than Fundamentals

Kenyan ETFs behave differently due to the nature of our market.

✔ Low supply vs high demand
Very few units are in circulation. A small surge in buying causes massive price movement.

✔ NAV and ETF price can disconnect
Global indexes might remain flat while the ETF price moves sharply, because most price action is due to:

• local demand
• scarcity of units
• retail excitement
• herd behaviour

✔ Social media–driven sentiment
Many investors buy purely because “everyone is buying.”

✔ The 1-share rule amplifies ETF volatility
Retail traders now enter ETFs more aggressively, creating sharp short-term swings.

Bottom line:
These ETFs are moving more on momentum and psychology than global index tracking.

🟩 4️⃣ What Investors Who Bought Low Should Do Now

Investors should not panic or rush. But they must shift from buying mode to profit-management mode.

⭐ Strategy A: Long-Term Investors (Over 5 years)

• Hold high-quality companies
• Focus on stability, cash flow, and consistent dividends
• Reinvest dividends to compound your portfolio
• Ignore daily price swings

Long-term wealth comes from discipline, not reacting to hype.

⭐ Strategy B: Medium-Term Investors (6 Months - 5 years)

• Consider taking partial profits
• Sell a portion of your holdings to secure gains
• Keep some portion invested for continued upside
• Rebalance your portfolio to avoid over-exposure to one sector

This reduces regret and emotional pressure.

⭐ Strategy C: Short-Term or Momentum Traders

• Be cautious with stocks rising too fast
• If a stock keeps touching the 10% limit, expect a correction
• Monitor demand vs supply on market depth
• Recognize that hype cycles end quickly
• Lock-in profits when momentum slows

Short-term profits disappear fast if not secured.

🟩 5️⃣ Building a Smart, Balanced Portfolio in the Current Market

Investors should aim for a balanced structure:

✔ Hold fundamentally solid companies
Focus on:

• consistent profitability
• good governance
• stable dividends
• manageable debt
• long-term growth potential

✔ Take partial profit on speculative or hype-driven counters
If you entered low and the price doubled or spiked rapidly, secure a portion of the gains.

✔ Avoid buying ETFs at peak valuations
Wait for corrections before entering. Hype-driven peaks rarely sustain.

✔ Reinvest dividends where possible
This grows wealth faster without injecting new capital.

✔ Diversify across multiple investment types
Including:

• local equities
• government bonds
• REITs
• fixed-income instruments
• money market funds (MMFs)
• mutual funds / other funds
• international markets

Diversification protects you from unexpected downturns and spreads risk across sectors and asset classes.

🟦 Wise Investor Check Out

The NSE is in a rare moment where:

• company earnings are recovering
• dividends are returning
• retail investors are highly active
• foreign money is flowing in
• the 1-share rule is boosting liquidity
• the 10% price limit is amplifying spikes
• ETFs are rising on momentum, not fundamentals

But the wiser investor is not the one who merely bought low — it is the one who knows how to manage profits, manage risk, and prepare for the next cycle.