Capital Markets

Foreign investor stock sales ease in February

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The Nairobi Securities Exchange. FILE PHOTO | DIANA NGILA | NMG

Net foreign investor sales at the Nairobi Securities Exchange (NSE) eased by more than seven times in February compared to January, in the absence of block trades on Safaricom that had inflated the January sales.

NSE data shows that net outflows from the market last month stood at Sh382.4 million, down from Sh2.86 billion the previous month.

As a result of the heavy sale in January, the cumulative net outflows from the NSE in the first two months of the year stood at Sh3.24 billion, which dwarfs the net sales of Sh235 million recorded in the corresponding period last year.

Read: Foreign investors pull out Sh24 billion from NSE in 2022

Safaricom, which was the prime mover in the foreign sales seen in January, recorded more balanced trading last month.

On January 19, the counter recorded net foreign outflows of Sh2.02 billion, one of the largest single-day exits seen in the market.

The sales came at a time when the telco’s stock was at the tail end of a sharp slide that saw it hit a 69-month low of Sh20.60 a share.

It would rally a week later to climb to Sh23 a share on the back of a block purchase by a local institutional investor.

The slowdown in foreign selling in February, therefore, provided a welcome relief for the NSE, which has been stuck in a bearish run largely blamed on global capital outflows from emerging and frontier markets to the US and the UK where bond rates have been raised to combat high inflation.

The US and the dollar have also been seen as a safe haven during the ongoing uncertainty in the global economy due to the Russia-Ukraine war.

The NSE’s traded turnover, however, fell last month to Sh4.6 billion compared to January’s Sh7.47 billion, partly as a result of the reduced foreign desk activity.

The continued weakening of the shilling remains a concern for foreigners trading on the stock market, exposing them to exchange losses upon exit.

Since the beginning of this year, the shilling has depreciated by 3.2 percent against the dollar, meaning that foreign investors who are selling shares now will incur higher costs when buying dollars for expatriation of gains abroad compared to a few months ago.

Read: Foreign investors trading at NSE halves in one week

When entering the market, foreign investors convert their dollars to shillings and do the reverse after selling to shift capital out of the country.

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