Foreign investors flock back to NSE after polls boost

Foreign investors flocked back to the stock market in April doubling share purchases in a reversal of the decline recorded in March, when election jitters are thought to have slowed their participation at the bourse.

Net foreign investor inflows to the Nairobi Securities Exchange (NSE) rose to Sh3 billion in April, compared to Sh1.68 billion in March.

The General Election held on March 4 saw an entire month in which economic activity came to a near-standstill as the declaration of the winner took a whole week after casting of votes.

Even after Uhuru Kenyatta was declared president-elect there was a period of uncertainty as Raila Odinga challenged the petition in the Supreme Court. This slowed down the stock market as well. Analysts said the positive sentiment following the peaceful election is what has rekindled foreign investor interest.

“We have seen foreign investors come back mainly because the election is over and it ended well,” said John Kamunya, head of research at financial advisory firm StratLink Africa.

However, the foreign investors’ inflow has not yet reached the February level when it stood at Sh3.8 billion ($45.4 million).

In November and December 2012, foreign investors inflows stood at about Sh2 billion in each month. Mr Kamunya said the entire economy was benefiting from the confidence boost which in turn was influencing the demand for risky Kenyan assets.

In a report dated May 5, London-based research firm Business Monitor International said the General election had shown “positive signs for Kenya’s political development.”

“Financial markets have responded positively to the result and we have resumed our bullish position on the Nairobi Stock Exchange 20 Index,” said the research firm in the monthly report on political risk and macroeconomic prospects.

Investor wealth at the NSE grew by Sh214 billion between January and April, according to a summary of trade data released by the exchange.

The stock market’s measure of share price movements, the NSE 20-Share Index, gained 17.06 per cent in the period to close at 4,765 points on April 30.

“Market capitalisation hit a historical mark of Sh1.6 trillion, gaining Sh214 billion in the period January to April 2013,” noted the NSE in the report released on Wednesday.

There are expectations of higher economic growth especially with the interest rate boost from the Central Bank of Kenya that cut its policy lending rate to 8.5 per cent from 9.5 per cent.

“We expect capitalisation at the bourse to grow as a result. CBK has signalled it will increase liquidity in the market with its lending rate action, and so we expect some of this cash to find its way to the bourse,” said Suntra Investment Bank research analyst Johnson Nderi in earlier interview.

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