NSE off to strong start as foreign investors return

The Nairobi Stock Exchange has emerged the best performing market among key African markets since the start of the year, feeding on foreign investor cash hunting for capital gains.

Research by the Business Daily indicates that the Nairobi Stock exchange NSE 20 Share index returned 26.8 per cent in the year to April 16 compared to Ghana’s GSE All Share Index (12.50 per cent), Egypt’s EGX 30 (12.2 per cent) and South Africa’s JSE index (six per cent).

Local analysts have attributed the show by the Nairobi bourse to “low priced shares” after the NSE faced deeper share price erosions in the last two years compared to other African markets.

As a result, international investors, mainly Africa-dedicated funds keen to cash in on the promise of higher returns than those found in other African markets, have increased their presence on the Nairobi bourse.

The NSE 20 share index has risen from 3,247 points to 4, 109 points since the start of the year.

“The East African equity markets had more or less lagged other African markets,” said Mr Eric Musau, an analyst at Renaissance Capital, adding that the new investor demand has helped the NSE catch up with the other main African markets.

The Johannesburg and Cairo stock exchanges are bigger than the NSE.

According to the NSE, the share of net inflows from foreign investors into the equity market had dropped to about 44.04 per cent as at March 26 compared to a high of 72.10 per cent on January 10.

The share of net inflows from local investors had on the other hand doubled to 55.96 per cent as at March 26 compared to 27.90 per cent on January 10.

But analysts say this should not be confused with foreign investors losing out because there is still some relative balance in trading.

“For instance we could still find that for every sale by foreigners there is a corresponding purchase among local investors,” said Judd Murigi, head of Research at CFC Stanbic Financial Services.

“The Nairobi Stock Exchange is the best performing in terms of return and investors are keen to get a piece of the action before the overall prices rise and reduce the margins.”

Blue chip stocks with high average daily turnovers such as Safaricom, East Africa Breweries, KCB Bank, Equity Bank, Mumias Sugar and Kenya Airways have remained the foreign investors’ favourite picks as they offer perfect platforms for ease of exits

Local institutional investors such as pension funds and insurance schemes have also picked the cue and are gradually returning to the stock market after opting to put their money in fixed income securities and real estates.