Traders at the Nairobi Securities Exchange. PHOTO | FILE
What you need to know:
A quarter two report by Standard Investment Bank shows the NSE had lost Sh3.2 billion in the first three months of the year.
Foreigners were exiting the large caps in favour of the smaller players whose market price is believed to have headroom for growth.
Foreign investors over the past three months withdrew a net Sh2.6 billion ($27.5 million) from Kenyan stocks in profit-taking and portfolio rebalancing that favoured Nigeria, marking the second consecutive quarter of outflows.
A quarter two report by Standard Investment Bank (SIB) shows the Nairobi Securities Exchange (NSE) had lost Sh3.2 billion ($34.6 million) in the first three months of the year.
The report says dollar inflows in Nigeria returned to a positive position in April this year, at the conclusion of a peaceful election, following three months of exits, underlining the portfolio change by investors with a preference for the West African market.
“There was profit-taking like in the case of Safaricom which got to a high in the last three months,” said Faith Waitherero, research analyst at SIB.
Foreigners were exiting the large caps in favour of the smaller players whose market price is believed to have headroom for growth.
Some of the counters that had large outflows include cigarette-maker BAT at Sh684 million, Safaricom’s Sh589 and Nation Media Group at Sh161 million.
NSE received the largest number of inflows at Sh361 million, followed by Liberty Insurance Sh142 million and Kenya Power Sh90 million.
Ms Waitherero attributed the investors’ interest in self-listed NSE to its plans to bring new products such as derivatives to the market in the second half of the year.
Investor outflow has a negative impact on the local currency as it creates higher demand for the dollar. The shilling has been depreciating against the greenback to exchange above the Sh99 mark in recent days.
Outflows have also been attributed to expected rise of returns in the fixed income market.
Research firm, Stratlink Africa, said it expected Central Bank to raise its interest rate again in its next sitting as it sought to support a depreciating shilling.
“CBK could further hike the benchmark rate or revise the Kenya Banks’ Reference Rate upward in a bid to tone down inflationary pressures,” said the research firm in a note to investors sent out on Thursday.
Analysts are hopeful that the recent scrapping of capital gains tax (CGT) on equities will attract foreign investors to the country and revamp the stock market which has lost six per cent since the beginning of the year.
“We have already seen increased volumes since equities were exempted from CGT,” said the chairman of NSE, Eddy Njoroge at a meeting held earlier this week.
The market has been on an upward swing in the last week with the indicative 20-share index rising above the 4,900 mark in Wednesday’s trading.
The index gained 68.49 points Thursday having risen 47.6 points on Wednesday, driven largely by bulk trading of Equity Bank shares.
“The rebound suggests the markets positive response to the elimination of the gains tax on returns arising from sale of shares. The CGT has been a thorny issue for the market with brokers, citing it as a major drawback on investor activity,” said Stratlink Africa.
Some of the other counters to witness foreign investor exits include cement producer ARM, Equity Bank, KCB, brewer EABL and Standard Chartered.
