Capital Markets

Foreign investors pull Sh1bn from NSE on Covid-19 jitters

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Nairobi Securities Exchange. FILE PHOTO | NMG

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Summary

  • AIB-AXYS Africa data shows that sales by foreign investors surpassed purchases for most days of October, with banking stocks and Safaricom being the most affected.
  • The net selling by foreign investors in October was a contrast from August and September where net buying of Sh10 million and Sh802 million was recorded respectively.
  • Coincidentally, August and September were the only months where net buying by foreign investors was reported since February.

Foreign investors on the Nairobi Securities Exchange (NSE) turned net sellers in October, withdrawing Sh1.13 billion on increased risk aversion due to a surge in Covid-19 infections and deaths, halting two months of net buying.

AIB-AXYS Africa data shows that sales by foreign investors surpassed purchases for most days of October, with banking stocks and Safaricom being the most affected.

The net selling by foreign investors in October was a contrast from August and September where net buying of Sh10 million and Sh802 million was recorded respectively.

Coincidentally, August and September were the only months where net buying by foreign investors was reported since February.

AIB-AXYS Africa head of research Sarah Wanga linked the October net selling to the increased risk aversion and the reduced attractiveness of equities as Covid-19 abyss continues to batter the fundamentals of many companies.

“Foreign investors are generally staying away from emerging and frontier markets. There seems to be an increased risk aversion,” said Ms Wanga.

“August and September net buying was mainly due to the attractive prices in the banking sector. Prices really fell in weeks that followed the release of half year results presenting attractive opportunities.”

October saw foreigners turn net buyers for only five trading sessions but the amounts involved were significantly lower.

Bank stocks such as KCB, Equity and Absa and other large firms like Safaricom and East African Breweries dominated the list of top stocks that featured most in net foreign selling charts.

The trend has persisted in the first week November, with Sh330 million net selling posted between Monday and Wednesday.

Ms Wanga expects the new Covid-19 control measures President Uhuru Kenyatta announced on Wednesday such as suspending political gatherings and increasing curfew hours to have little impact on foreign investor sentiments.

“The risk aversion looks set to persist but November will partly depend on the results that banks will release. if we see positive results, they are likely to turn into net buyers once again,” said Ms Wanga.

Kenya, which started relaxing control measures in July, is seeing a surge in infections that has prompted President Kenyatta to tighten control measures.

In the last week, a record 111 deaths have been reported, with a national tally closing at 1,013.

Average foreign investors participation in three months to September was at 67.1 percent compared to 64.59 percent recorded in the second quarter.