KCB takes bulk of foreign inflows

Huge foreign investor interest in KCB helped lift the net foreign flows on the Nairobi Securities Exchange back into the positive territory in August after net outflows in July.

Data released by Standard Investment Bank shows the total foreign inflows into the bourse in August stood at Sh3.3 billion with KCB taking the lion’s share of net inflows of Sh2.16 billion to dominate trading by non-Kenyans.

Safaricom recorded the second highest net foreign investment last month at Sh411 million, ahead of East Africa Breweries’ Sh290 million.

According to analysts, foreign inflows were influenced by corporate actions and earnings announcements, leading to heightened activity around banking counters.

“KCB results came in above expectations, within a market that did not have stellar performance as we saw some return below expectation results.

Equity and Coop Bank’s activity has been largely driven by corporate actions too,” said Kestrel Capital analyst Kuria Kamau.

The CMA statistical bulletin for the second quarter of the year showed foreign companies had sold their KCB shares mainly to local firms.

The bulletin showed at the end of June foreigners held 831.9 million shares or 27.9 per cent of Kenya’s largest bank by assets, down from 1.43 billion shares at the end of March.

The last two months have, however, seen the lender pull in combined inflows of Sh3.33 billion, with the earlier sell-off having been attributed to profit-taking following appreciation of the share price.

In the first three months of the year, capital flight from emerging and frontier markets saw net outflows of Sh2.8 billion.

Net inflows in April, June and now August have helped the market return to a positive position of Sh2 billion in the year-to-date.

Going forward, analysts say, local investor activity in the market is increasing, potentially reducing the foreign dominance of the market that saw the foreign turnover average 54.3 per cent of total market sales this year.

“Local investors have been active during this earnings period, driving the market more than the norm. They are both buying and selling although local funds seem to be accumulating on dividend paying counters,” said Genghis Capital analyst Silha Rasugu.

Direct competition

While Safaricom reversed its foreign flow position from negative to positive between July and August, EABL remained in the positive. Equity Bank though has had two straight months of net outflows.

The bank saw net outflows of Sh58 million in August to buck the big counter trend, piling on a net outflow of Sh641 million in July.

The bank is set to roll out its mobile virtual network that will see it come into direct competition with Safaricom in the mobile money segment.

Investors may have noticed the postponement of the launch at a time when KCB and Safaricom launched their Biashara Smart product targeting the SME mobile money market.

Within range

Equity has, however, regained its position as the top bank at the NSE by capitalisation ahead of KCB with a valuation of Sh180.5 billion compared to the latter’s Sh173 billion.

Both lenders have enjoyed share price gains this year, with Equity currently 50 per cent higher since January at Sh48.75 and KCB 20 per cent up at Sh58.

The two lenders are currently within range of their all-time highs as well, which stand at Sh50 for Equity and Sh60 for KCB.