Capital Markets

Foreign investor activity at NSE rebounds to 64 percent

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A stockbroker at the Nairobi Securities Exchange trading floor. FILE PHOTO | NMG

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Summary

  • Foreign investors’ share of traded turnover at the bourse stood at an average of 64 percent in first three weeks of October, largely trading on the stocks of Safaricom, Equity Group and EABL.
  • Their share of turnover had dropped to 48.5 percent in August and rose marginally in 49.9 percent in September as the investors shifted away from listed local equities to other high returns investments.

Foreign investor participation at the Nairobi Securities Exchange (NSE) rebounded last month after holding below 50 percent in the two previous months, indicating renewed confidence in the market.

Foreign investors’ share of traded turnover at the bourse stood at an average of 64 percent in first three weeks of October, largely trading on the stocks of Safaricom, Equity Group and EABL.

Their share of turnover had dropped to 48.5 percent in August and rose marginally in 49.9 percent in September as the investors shifted away from listed local equities to other high returns investments and to developed markets.

Analysts have attributed the rebound to concerns of inflation in global markets, making the local listed firms an attractive alternative—hence investors flocking back to NSE.

“Investor concerns over inflation and the growing likelihood of an upward revision of the Fed rate and other benchmark interest rates resulted in flow of capital to frontier and emerging markets in October,” said Renaldo D’Souza, head of research at Sterling capital.

Foreign investor participation averaged at 64.7 percent in 2020.

Mr D’Souza added that the decline in foreign investor activity in August and September was due to rising bond yields in markets such as the US and Europe.

Although there has been an improvement in local investor participation at the market, overall traded equities turnover remains low compared to previous years, while that of bonds is at record levels.

Capital Markets Authority (CMA) data shows that equities turnover at the NSE in the nine months to September stood at Sh101.1 billion, which was 17 percent lower than the Sh121.2 billion worth of shares traded in the corresponding period last year.