Foreign investors have increased their wealth at the Nairobi Securities Exchange. FILE
What you need to know:
CMA data shows the foreigners controlled 40.7 per cent of the market that had a capitalisation of Sh1.6 trillion at the end of March this year compared to 27.9 per cent of the market, which was valued at Sh940.8 billion a year earlier.
That means the actual holding by foreign investors grew from Sh263 billion to Sh651 billion during the period under review.
Local institutional investors sold shares for fear of losing money in the run up to the elections, giving room for foreign investors to enter the market.
Foreign investors have increased their wealth at the Nairobi Securities Exchange twice since April last year after they shrugged off election jitters to absorb shares that were being offloaded by wary local institutional investors.
Data from the Capital Markets Authority shows the foreigners controlled 40.7 per cent of the market that had a capitalisation of Sh1.6 trillion at the end of March this year compared to 27.9 per cent of the market, which was valued at Sh940.8 billion a year earlier.
That means the actual holding by foreign investors grew from Sh263 billion to Sh651 billion during the period under review.
“The volatility of 2011 made a lot of investors weary. It took time to build confidence while foreign investors viewed Nairobi as cheap,” said Einstein Kihanda, chief investment officer at ICEA Lion Group.
Over the same period local investors were net sellers but the value of the ownership still went up from Sh645 billion to Sh908 billion because of a steady rise in prices.
“There were opportunities in the market even after the companies announced their financial results. The equities were still under priced and those who stayed out lost an opportunity,” said Johnson Nderi, head of research at Suntra Investments.
The average return over the one year period was 44.4 per cent with the indicative 20 share index rising to 4,861 points in March from 3,367 points a year earlier. Mr Nderi said local institutional investors exited the market for fear of losing funds placed under their trust in the run up to the March 4 General Election.
Their exit, soon after the market had recovered from the 2011 slump gave room for foreign investors to enter the market.
Some of the counters that have enjoyed huge foreign participation include East African Breweries Limited and cigarette maker BAT, which have touched highs of Sh426 and Sh565 per share.
Low interest rates in the Euro zone as governments put effort to resuscitate their economies also meant there were no lucrative opportunities in European markets forcing the foreign investors to look beyond their borders for even modest returns, said Mr Kihanda.
The increased participation of foreign investors helps boost diaspora remittances which support the Kenyan Shilling against other international currencies.
Foreign investors are also considered to be more analytical of the investment environment hence their increased participation signifies a good outlook for the country.
Over the one year period there were 25 new foreign corporate investors to push their number in the market to 367. They held 13.2 billion shares compared to 7.46 billion units an year earlier.
The number of local corporates in the market dropped to 37, 383 from 38,905 a year earlier while individual investors reduced by 1.4 per cent to 856,462 investors.
Data from the Retirement Benefits Authority shows that the pension schemes portfolio in the equities market rose by 13.4 per cent between June and December last year largely due to share price movements.
Majority of the foreigners’ investment was made from September last year when they would have been expected to be exiting the Kenyan market due to election jitters.
The average foreign participation in the three months to March was 50.1 per cent compared to 42.8 per cent in the first quarter of last year.
“Since 2005, when they came into the market in a big way most of them have been long term so they are not deterred by election periods. Actually some of them become aggressive, taking advantage of the timing because of the prices,” said Eric Musau, an analyst at Standard Investment Bank.
Preferred stocks by the foreign investors were those listed in the banking, manufacturing and energy segments where high levels of activity supported margin trading. Investment counters attracted the list interest from the punters.
Their shareholding in Olympia Capital dropped to under one per cent from 70.33 per cent while in City Trust it fell to 7.4 per cent from 65.6 per cent an year earlier signifying mass exit.
The other two counters in the investment segment Centum and TransCentury also recorded a drop in foreign investors holding. The foreigners’ stake in Centum dropped to 2.6 per cent from 18.9 per cent while that of TransCentury slide to 6.2 per cent from 8.6 per cent.
With the rise in interest rates, margins enjoyed by banks – the difference between cost of deposits and the price at which the funds are lend – widened enabling them to post record profits.
Foreign investors increased their stake at Equity Bank to 47.4 per cent from 42.3 per cent and in KCB their holding rose to 23 per cent from 14.4 per cent.
CFC Stanbic also recorded increased foreign ownership through its Sh4.4 billion rights issue which the government and some other eligible local investors sat out.
Advertising firm Scangroup was most attractive with the foreigners’ investment in the firm rising to 61.2 per cent from 46.9 per cent an year earlier. The counter was a major beneficiary of the heightened political campaigning through campaign messaging.
Power distributing company Kenya Power also saw increased foreign ownership driven by the ambitious plan of the government to expand electricity generation and distribution.
Analysts said foreigners’ followed liquid counters from which they could exit quickly to grab other emerging opportunities.
