Shares of smaller firms outshone blue-chip stocks in the first quarter of 2025, as speculative trading continued to dominate the Nairobi Securities Exchange (NSE), driving market growth by six percent.
Four of the top five best-performing stocks were small caps, with TransCentury Plc leading the charge. The company’s share price surged by an impressive 233 percent, rising from Sh0.39 at the end of 2024 to Sh1.26. East African Cables Plc followed closely with a 106.4 percent increase, while Uchumi Supermarkets Plc and Home Afrika both posted gains of 105 percent.
Small-cap stocks in Kenya refer to companies with relatively low market capitalisation, typically valued at less than Sh4 billion. Despite their size, these firms have attracted strong investor interest due to their potential for rapid price appreciation.
Market Performance Overview
The Nairobi All Share Index (NASI) gained 5.9 percent in the first quarter of 2025, adding Sh117 billion to investor wealth. However, blue-chip firms lagged behind their smaller counterparts, posting only modest gains.
- Safaricom, the NSE’s largest counter, recorded a 7.3 percent increase, closing the quarter at Sh18.30.
- BAT Kenya declined by 1.2 percent.
- East African Breweries Limited (EABL) gained 2.5 percent.
- Equity Bank saw a decline of 2.4 percent.
Speculators Drive Small-Cap Rally
Analysts attribute the surge in small-cap stocks to speculative trading, where investors are drawn to their low nominal prices and the potential for substantial short-term gains. Historically, counters such as East African Portland Cement Company Plc, Kenya Power, KenGen, KCB, and I&M Group have seen similar speculative-driven rallies, yielding significant price surges.
“Some investors focus on the cheapest stocks, betting that they will appreciate, without considering the fundamental weaknesses of some companies, including poor financial health and lack of operational transparency,” said Ronnie Chokaa, a senior research analyst at Capital A Investment Bank, in a previous interview.
While small-cap stocks offer high-reward opportunities, they are also more volatile and riskier compared to large-cap stocks. Many of these companies have struggled with governance issues and financial instability.
For instance, Uchumi Supermarkets has flouted NSE listing rules by failing to disclose its financial performance for over five years, despite being bankrupt for several years.
Other Strong Performers
Beyond the top gainers, several other stocks recorded significant growth of over 50 percent during the quarter, including:
- Sanlam Kenya Plc
- Unga Group Plc
- Liberty Kenya Holdings
- HF Group Plc
- Sameer Africa Plc
- Kenya Power Plc
Market Outlook
Only 18 of the 62 actively traded stocks on the NSE saw price declines in the first quarter of 2025, signaling continued positive investor sentiment. The strong performance builds on last year’s market rally, where the NSE gained 34 percent, fueled by a mix of price increases across both small and large-cap stocks.
Currently, the NSE’s market capitalisation stands at Sh2.05 trillion, up from Sh1.93 trillion at the end of 2024 and Sh1.43 trillion at the end of 2023. The robust market growth indicates sustained investor confidence in Kenya’s equities market, particularly among retail traders keen on capitalizing on speculative opportunities in small-cap stocks.
