NSE records fewer equity trades as foreigners dominate

Investors executed significantly fewer equity trades in the stock market this year, with the number of deals declining by nearly 150,000 from last year.

NSE market data shows there have been 403,365 deals this year, with only one week’s worth of trading to go, compared to 548,991 in the whole of 2014.

Despite the fewer trades, the market turnover has been at par with last year’s record total, with analysts attributing this to a larger number of high-net worth trades, shown by the dominance of foreign investors.

“The deals transacted during the course of the year declined as a result of a lower number of retail investors, majority from the local front engaging in active trading. Minimal capital appreciation was witnessed during the year on various counters, including banking stocks which made active trading unattractive,” said Genghis Capital analyst Mercyline Gatebi.

Turnover now stands at Sh207.28 billion compared to the full-year total of Sh215.72 billion in 2014.

Foreign investors have accounted for 62 per cent of the total turnover this year. This means that stockbrokers with strong foreign desks are likely to widen their lead at the top of the earnings race.

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

In contrast, activity was more equal last year, with foreign investors accounting for 51.1 per cent of activity and local investors 48.9 per cent.

Foreign outflows and inflows have been balanced, however, with analysts saying that interest from Africa-focused funds, targeting possible future rise in share prices, has balanced exits from developed market investors retreating to safer markets, especially the US.

Some of the blockbuster trades that have dominated the market this year include the divesture of Equity Holdings shares by private equity fund Helios Partners, which sold its 24.99 per cent stake in the bank partially through the sales in the stock exchange.

In addition, investors have had to contend with less than impressive financial performance of a number of listed companies. There have been a record 14 profit warnings this year compared to 11 last year and eight in 2013.

“Poor corporate earnings during 2015 have also contributed to the meagre deals in the market, possibly because investors shied away from the equities market and focused more on the fixed-income market which gave better returns.

“Retail investors may have opted to be on the passive end and just benefit from the dividends paid out by listed companies if there were any,” said Ms Gatebi.

The decline in the NSE 20 Share and All Share indices, bringing to a close a three-year bull run, also had the effect of discouraging speculators.

These investors, usually looking to make a quick gain on stocks, flock in when prices are on the up, but would have been discouraged by the slide in valuation from March onwards.

The capital gains tax introduced in January also spooked the market, discouraging investors from trading in the first two months of the year, a period when many would have otherwise been taking profit on shares whose prices were still on the up.