Foreign investors boost banks and insurance NSE stocks in October

Banks and insurance companies dominated the list of top 10 companies that saw the inflows of foreign cash at the Nairobi Securities Exchange (NSE) in October.

However, the top three in inflows were the listed company NSE, followed by British American Tobacco (BAT) and Safaricom which had net flows of Sh344 million, Sh325 million and Sh310 million respectively.

According to data compiled by Nairobi-based Standard Investment Bank (SIB), financial companies including CfC Stanbic, Equity Bank, Kenya Re, Liberty Holdings and Jubilee Holdings were among the top 10 firms with net inflows ranging from Sh42 million to Sh156 million.

CfC Stanbic attracted a net inflow of Sh156 million while Kenya Re had Sh128 million and Liberty Sh45 million.

“Some of the inflows into the companies listed on the NSE were driven by depreciation of the local currency meaning that for every dollar, one was getting more shillings to buy shares,” said Eric Musau, a senior research analyst at SIB.

The peak of the depreciation of the Kenya shilling came at about Sh105-106 to the dollar in September and October, which was more than 14 per cent fall relative to the beginning of the year. Since mid-last month, the shilling has, however, stabilised and is now trending towards 101 units to the dollar.

In some of the cases, buying by foreign investors may have been driven by the low prices of shares. In the year to date, Mr Musau noted, CfC Stanbic has lost 31.9 per cent of its market value.

Equity Bank and Liberty Insurance have lost 16 and 16.3 per cent of their market capitalisation respectfully. The price of BAT, which is also among the companies on the list of top 10 by net inflows, has fallen by15.4 per cent since the year began.

The net inflows for all companies were more than outflows by Sh846 million ($8.3 million) in October. The third quarter of the year (July to September) also witnessed positive net inflows after several quarters of net outflows.

The SIB report noted that a number of companies including banks experienced net foreign outflows but the amounts were relatively low compared to that of the companies that saw net inflows into their stocks in October. This is the reason net inflows were more than outflows for the entire month.

“What we have seen in some counters is profit taking, but in other counters the outflows have to do with liquidity moving from equities into the fixed-income market due to the high interest rates,” said Mr Musau. Investors have especially favoured long-term Treasury issues.

The NSE has lost about 25 per cent in the year-to-date driven by poor corporate results, uncertainty around the capital gains tax in the early part of the year and the shift of cash into the treasury bills and bonds market to take advantage of the high yields.