Foreign investors’ net purchase of stocks at the Nairobi Securities Exchange (NSE) hit a four-year high in August at Sh1.6 billion as worries over the global Trump tariffs continue to wane.
Data from stock brokerage firms show that the net purchase in August was the second this year after June’s of Sh820 million, with foreigners having been net sellers for most months since 2019.
Foreign investors had largely stayed out of emerging and frontier markets over fears of a global slowdown after the US in April announced higher tariffs for dozens of countries.
Analysts have attributed increased inflows from foreigners in August to the reduced uncertainty in the wake of the tariffs, with projections from the likes of the International Monetary Fund (IMF) showing growth will be stronger than expected.
The Federal Reserve is also primed to resume cutting interest rates from September to prop up the US economy in the face of weak labour data and a steady decline in inflation.
This often drives investors who previously sought high returns from the US Treasury papers to equities, including stocks, in emerging countries like Kenya.
“The global economy has been a larger determiner of the direction and intensity of foreign flows,” said Standard Investment Bank (SIB) Senior Research Associate Wesley Manambo. “With rate cuts expected in the US, we expect foreign flows to continue crossing over into emerging and frontier markets.”
Fresh interest in NSE listed stocks has been largely concentrated on large cap stocks such as commercial banks as foreigners favour value companies.
The banking sector stocks alongside Safaricom and EABL have been a staple for foreigners based on their consistent track record in paying out dividends.
The high liquidity of the counters has also allowed foreigners to dip in and out of the stocks at will in contrast to smaller cap stocks.
Net foreign investor inflows in August have bolstered blue-chip counters, which are favoured for their potential for not just capital gains but also dividends.
“Foreigners are coming back into the blue-chip counters they exited, including commercial banks, Safaricom and EABL,” added Mr Manambo.
Foreign investors, however, remain net sellers on a year-to-date basis with portfolio outflows of Sh2.4 billion, where the bulk of the exits occurred in the quarter to March.
This has been despite the continued market rally, currently in its second year running, and which has lifted investors wealth past the Sh2.6 trillion mark so far this year from Sh1.43 trillion at the end of 2023.
Foreign investors have been net sellers since 2019 with the long domestic market bear run and global shocks, including the Covid-19 pandemic driving outflows. Foreign investors were net sellers in 2024, marking exits of Sh2.4 billion across the year.
Portfolio flows by the investors last turned positive over a calendar year in 2019.
The participation of foreign investors in the NSE has equally been haphazard in the opening eight months of the year with the investor dipping in and out of the market.
The foreign investor participation rate in the market dipped to a low 31.03 percent in March 2025 of the market turnover before recovering to 59.51 percent in April, says data from the Capital Markets Authority (CMA).
The participation rate fell once more in May to 36.06 percent before recovering again in June.
CMA attributes 2025 outflows mainly to a general risk-averse stance and relatively strong yields in Western markets, which encouraged foreign investors to keep cash in their home markets.
“Globally, risk-off sentiment, higher interest rates and stronger yields in developed markets, especially the US, have made frontier markets like Kenya less attractive,” CMA said.
The markets regulator says steady foreign investors’ outflows pose risks to market stability, given their substantial share trading share at the NSE.
But CMA considers outflows above Sh50 billion as high.
The capital market regulator has mulled interventions to boost foreign inflows, including the implementation of daily trading strategies and the removal of barriers to foreign investment.
Daily trading interventions have in the past included the partial waiver of fees when buying and selling a stock on the same day.
