Locals outshine foreign investors in equities market

Local investors have become more active than their foreign counterparts in the equities market over the past two months, reversing an eight-month trend that saw foreigners dominate the market.

Foreign investors dominated the market from December 2013 to July this year.

Monthly market activity records from the Nairobi Securities Exchange (NSE) show in September market turnover stood at Sh19.24 billion, with local investors accounting for 54 per cent of it or the equivalent of Sh10.4 billion.

In August locals accounted for 55.4 per cent or Sh8.6 billion of market turnover that stood at Sh15.5 billion.

In the first seven months of the year, foreign investors’ share of total market turnover averaged 54.3 per cent monthly.

Local activity has been dominant in medium and small caps, especially those that saw a rapid gain in price such as Centum, Britam, NIC Bank and NSE.

“We have seen some profit taking on these counters, with the high liquidity moving the market. Several companies have had projects bearing fruit hence exciting local investors,” said Standard Investment Bank analyst Eric Musau.

According to data for September, local investors accounted for 89 per cent of Centum’s Sh1.02 billion turnover while for Britam the locals accounted for 87 per cent of the turnover totalling Sh605 million.

For the newly listed NSE counter that had a total turnover of Sh935 million in the month, local investors accounted for 90 per cent of the amount.

CIC Insurance and NIC Bank saw local investors accounting for 98 per cent and 94 per cent of turnover of Sh358 million and Sh205 million respectively. Foreign investors, however, continued to dominate large cap counters.

Safaricom, which led the market in total turnover in September, had foreign investors account for 65 per cent of the Sh3.4 billion turnover in the month.

Out of East African Breweries Ltd’s Sh1.27 billion turnover in September, foreigners transacted Sh835 million or 65.7 per cent.

KCB saw the foreign share of its Sh2.1 billion trade turnover at 62.3 per cent, while Equity Bank had more balance as locals edged out foreigners at 52.8 per cent to 47.2 per cent on a turnover of Sh2.6 billion.

The month, however, saw a net outflow of foreign capital with sales of Sh9.3 billion against purchases of Sh8.4 billion. Analysts see this as a sign of redistribution of portfolio by investors, who have an eye on the capital gains tax set to kick in from January 1, 2015.

Old Mutual Securities analyst Eric Munywoki said investment is most likely going to other sectors of the economy such as public private partnership joint ventures.

He sounded a positive note for the future of inflows into the country, given the returns available for investors.

“Given the nature of high interest rates in this region, we should continue to see foreign inflows in the future,” said Mr Munywoki.

Kenya’s stock market has offered investors a 20 per cent return in dollar terms this year, which is higher than other markets in the region.