Foreigners shed shares worth Sh1.1 billion last month, according to market data, marking a renewed sell-off from the Nairobi Securities Exchange (NSE.
The net sell-offs in September are a reversal to the Sh668 million portfolio inflows in August when the offshore investors marked a rare net buy position in the bourse.
Foreign investors have remained net sellers for most of the year but were buyers in June and August.
The renewed selloff is attributed to the continued rise of interest rates in advanced economies, which has seen foreigners preferring to invest in their home markets which offer comparatively higher returns.
While the US Federal Reserve left interest rates unchanged in its September meeting, it indicated interest rates would hold up for longer than previously indicated in addition to signaling a further interest rate increase before 2024.
Other central banks in advanced economies have followed the Fed with the European Central Bank, for instance, raising interest rates to an all-time high in mid-September with a view to cool consumer prices.
With interest rates in advanced economies likely to hold up for longer, investors have positioned themselves to take advantage of the comparatively higher returns, staying out of frontier and emerging markets.
“The sell-offs in September are driven by the US raising their rates which has made investments in advanced economies to be more attractive than in the frontier markets,” said Stacy Makau, a research analyst at AIB-AXYS Africa.
Since the start of the year, foreign investors have dumped shares worth Sh18.7 billion at the NSE with the bulk of exits happening in March at Sh10.6 billion.
The net foreigners’ selloffs have culminated in the participation of offshore investors as a percentage of equity turnover equally falling off in recent months with the participation rate easing to 40.45 percent as of June from 59.54 percent at the end of December 2022.
At the same time, the exit of foreigners has accelerated losses for the bourse with the year-to-date performance of the Nairobi All Share Index, NSE 20 and NSE 25 returning losses of 25.2, 9.9 and 21.2 percent respectively.