NSE registered net foreign outflows of Sh1.4 billion in July, the fifth straight month of net outflows, largely on account of foreign selling on the Equity Holdings counter.
Foreign investors recorded a fifth straight month of net outflows from the Nairobi Securities Exchange in July, largely contributing to the bourse shedding 10 per cent value in the month.
Market data compiled by Standard Investment Bank shows the bourse registered net foreign outflows of Sh1.4 billion ($13.88 million) in July, the fifth straight month of net outflows, largely on account of foreign selling on the Equity Holdings counter.
The cumulative net outflows for the first seven months of the year stood at Sh7.5 billion.
The outflows have coincided with a rebound of the Nigeria Stock Exchange, which recorded net inflows of Sh8.5 billion ($83.1 million) in the second quarter of the year after witnessing outflows of Sh95 billion ($960.55 million) between January 2014 and March this year.
Analysts have pointed to the Nigerian market as one of the destinations of capital fleeing the Kenyan market — and other peer bourses on the continent — following the successful elections in Africa’s largest economy and renewed business optimism.
“When we were doing well in our market the Nigerian market was quite negative, ahead of their March elections. Since then we have seen their market recover as ours started its slide — although this is just one of several factors contributing to the outflows,” said Old Mutual Securities analyst Halima Saadia.
Equity Holdings led the market in net foreign outflows last month at Sh2.2 billion ($21.6 million), followed by BAT Ltd at Sh178.1 million ($1.75 million).
Equity shed 17.4 per cent during the month to end at Sh39.75 a share on selling pressure, while BAT was unchanged at Sh741.
CfC Stanbic, down 23.4 per cent year-to-date (16.7 per cent down in July), performance was cited as one of the reasons for pan-African fund Allan Grey’s 10 per cent decline in returns on African equities.
On the inflow side, KCB Group in July led the market with a net of Sh412.6 million ($4.04 million). Cooperative Bank was second on Sh242 million ($2.4 million) followed by Safaricom which recorded net inflows of Sh224 million ($2.2 million).
Other than outflows to Nigeria, analysts also say the US market could be pulling back some capital from emerging and frontier markets as its economy improves.
“Foreigners, who control a lot of the NSE activity are moving, for example, to the US where the Federal Reserve is expected to raise its bank rates, making the fixed income market there very attractive,” said ABC capital analyst Joshua Otiende.
Other factors at play include the weakening shilling that has seen selloffs as foreigners rush to protect the dollar value of their investments, and the capital gains tax (CGT) which was reintroduced in January.
The CGT issue contributed to the negative sentiment in the market in the first half of the year. There was a standoff between stockbrokers and the government over modality of its implementation.
The Treasury announced in June it would replace CGT on stocks with a withholding tax at 0.3 per cent of the gross transaction value of listed securities, with expectations being that this would boost the market.
However, market players were celebrating too early as the proposal is set to be implemented next year, meaning investors at the bourse would continue paying capital tax until the end of the year.
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