Foreign investors pull out Sh1.5bn from NSE, hurt top share prices

Foreign investors pulled out more than Sh1.5 billion from the equities market last month putting downward pressure on the Nairobi Securities Exchange (NSE) 20 share index.

Data from the Nairobi-based Standard Investment Bank (SIB) shows there was a net cash outflow — inflows minus outflows — in the shares market last month compared to net inflow the previous month.

In October, there was net inflow of Sh870 million into the equities market from overseas investors.

In November, the exits by foreign investors seems to have put a damper on the prices resulting in the main index falling below the psychological 4000 points on most part.

On Wednesday, the main index was at 3978.2 points having slipped after holding at just above 4000 points for some days.

Analysts said while there were exits by foreign investors, there was some interest from Africa-focused funds targeting possible future rise in the prices of the listed companies.

“Even with some exits, there are those foreign investors with Africa-focused funds. So some may be leaving because of global issues relating to the dollar, but there are those who are still investing,” said Eric Musau, senior research analyst at SIB.

The main factor affecting foreign investors is the value of the local currency which has weakened in the course of the year. At the beginning of the year, the dollar was exchanging for Sh90.70 on average but has since sank to Sh102.30 to the greenback. This represents about 11.3 per cent depreciation, meaning that they have to fork out more shillings in order to get back a dollar.

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Mr Musau said local institutional investors should take advantage of the market situation to put their money in the equities.

Local investors are not supplying a lot of shares to the market, which is the reason the turnover has fallen in the course of November. According to SIB data, the turnover last month was Sh13.1 billion compared to Sh17.7 billion — which represented a 25.7-per cent fall.

The companies that attracted the largest amounts of the net inflows were Equity Bank taking Sh458.5 million, Safaricom with Sh251.6 million and CfC Stanbic Bank with Sh240.7 million.

Other listed companies that raked in significant amounts were the NSE, Kenya Re and Williamson Tea.

Mr Musau said the fall in interest rates should be a major pull factor to NSE-listed firms. Interest on the short-term paper has fallen by more than half in the past few weeks as liquidity improved.