Foreign investor sales at the Nairobi Securities Exchange (NSE) slowed down in August, reflecting a decline in the supply of shares after heavy sales in preceding months and dollar availability constraints for those looking to ship funds overseas.
Their net sales stood at Sh1.55 billion last month, halving from Sh2.97 billion in July and Sh5 billion in June.
The sales had spiked in the second quarter of the year as investors moved funds to western markets, where central banks were raising rates in a bid to ward off decades-high high inflation that resulted from increased energy and food prices due to the Russia-Ukraine war.
In Kenya, the selling tide has eased naturally as holdings by foreign investors shrink, with this category of shareholders already holding a minority of the issued shares at the NSE at about 20 percent.
The ongoing struggle to raise dollars in the market due to high demand from importers has also tempered sales, coupled with exchange losses for those looking to buy dollars to repatriate capital abroad due to the shilling weakening to an all-time low of 120.20 units against the greenback.
“Foreign outflows have decreased most likely because the amount of equities held by foreigners has decreased after the heavy selling in from May to July, so there is less to sell logically,” said Mr Muathi Kilonzo, director - Frontier Equity Sales and Head of Equities Kenya at EFG Hermes.
“With the dollar repatriation issues, you may find that foreign investors decided rather than sitting with cash trying to buy dollars they might as well remain invested. Another factor is that after the heavy selling a number of counters started to look very cheap and attractive.”
The capital flight has affected key blue chips such as Safaricom, BAT Kenya, Equity Group and East Africa Breweries Limited (EABL), whose resultant price falls have made them attractive for buying, especially in light of their consistent dividend payouts.
Foreign investors previously dominated trading on the bourse, accounting for 58 percent of the equities transactions in the first half of the year, but their participation declined to 46 percent in August. The slowdown in exits also follows the peaceful conduct of Kenya’s general elections last month.
Global inflation is however expected to keep going up, according to the International Monetary Fund, due to food and energy prices as well as lingering supply-demand imbalances, which could trigger further capital outflows from developing economies.