Foreign investors flee NSE for bullish Nigerian exchange
A Nairobi Securities Exchange staff monitors trading at the Exchange building. The NSE 20 share index is down to 5083.94 points. FILE PHOTO | SALATON NJAU
What you need to know:
The indicative NSE 20 share index has been on a downward trend while the Nigerian 30 share index has seen an upward swing.
StratLink attributed the bear run at the NSE to corporate outcomes falling below investor expectations.
Earlier in the year investors had exited the Nigerian market in favour of Nairobi due to election jitters in the West Africa State. The market has recorded an upturn following the peaceful elections earlier in April.
Investors are exiting the Nairobi Securities Exchange (NSE) for the higher yielding Nigerian bourse, piling more pressure on the weak Kenyan shilling, a research firm says.
Data from StratLink Africa shows that shares sold by foreign investors were worth Sh3.3 billion more than what they bought in the last two months. The outflow of money from the market underlines the investors’ search for better returns.
April was the second consecutive month of investment outflows with Sh90 million equivalent exits while March saw net outflow of over Sh3.2 billion.
“Brokers that StratLink Africa has reached out to intimate that the bear run has been aggravated by an improved investor perception of Nigeria with foreign investors exiting the Kenyan market for its Nigerian counterpart,” said the research firm in a report released a week ago.
The indicative NSE 20 share index has been on a downward trend while the Nigerian 30 share index has seen an upward swing.
StratLink attributed the bear run at the NSE to corporate outcomes falling below investor expectations. Several listed companies have also issued profit warnings further dampening investor expectations.
Data from Central Bank of Kenya shows the banking sector grew at a slower pace in the first three months compared to a similar period last year, underlining a challenging business environment.
Confusion over the implementation of a capital gains tax in the equities market also tested investor willingness to enter the Kenyan market.
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 Sh95 mark last week.
“We expect the shilling to remain weak trending between the Sh94 to Sh96 units band of exchange to the dollar towards the end of June and into the third quarter of 2015,” said StratLink.
Safaricom witnessed the largest foreign outflow in April with sales exceeding buys by Sh820 million.
Other counters that recorded net outflows include Equity Bank, DTB, ARM and I&M holdings.
KCB, Centum, EABL and Co-operative Bank were the favourite destinations of foreign investors last month. KCB received net inflows of Sh1 billion to top the list.
Last week stockbrokers recorded more exits by foreigners.
“For the third straight session, foreign investors were net sellers accounting for 81 per cent of total sales,” said Standard Investment Bank in a market report released on Friday.
Earlier in the year investors had exited the Nigerian market in favour of Nairobi due to election jitters in the West Africa State. The market has recorded an upturn following the peaceful elections earlier in April.
At end of last week the NSE 20 share index was 5083.94 points down from 5117.43 in January as its Lagos rival rose over 200 points.
Embattled sugar company, Mumias, has recorded the largest share price drop followed by Kenya Airways, both of which have shed more than a third of their value in the last three months.
Other losers include Carbacid and TransCentury who have lost a quarter of their value in the same period.
