Capital Markets

Foreigners turnover at NSE dips to 3-year low

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A stockbroker at the Nairobi Securities Exchange trading floor. FILE PHOTO | NMG

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Summary

  • Data from the Capital markets Authority (CMA) shows that foreign investors accounted for 54.74 percent of all traded turnover last month.
  • Foreign investors have tended to trade almost exclusively on the large blue chips such as Safaricom, EABL, Equity Bank, and KCB.

The share of traded turnover attributed to foreign investors at the Nairobi Securities Exchange (NSE) fell to a three-year low in June, reflecting growing confidence in the market among local investors.

Data from the Capital markets Authority (CMA) shows that foreign investors accounted for 54.74 percent of all traded turnover last month, the lowest since May 2018’s 50.98 percent.

In the intervening period, these investors have at times accounted for as much as 81 percent of turnover, despite holding just under 20 percent of the issued shares at the market.

This year though, the highest level of foreign participation is April’s 64.8 percent.

“Average foreign investors participation in the second quarter of 2021 was 58.73 percent compared to 60.37 percent recorded in quarter one of 2021, indicating a 1.64 percentage point decrease in foreign investor participation during the quarter,” said the CMA in its second-quarter 2021 statistical bulletin.

Local investor participation had tailed off in recent years due to a prolonged bear market, which has seen the benchmark NSE 20 share index trading below the 4,000 points mark for the past four years.

There have been signs of recovery, however, as the economy recoups the losses caused by the Covid-19 pandemic, even though the majority of the gains are concentrated among a few large blue-chip counters.

For instance, the NSE 20-Share Index rose by three percent in June compared to May, while market capitalisation was up by 2.1 percent to hit Sh2.7 trillion during the month.

Foreign investors have tended to trade almost exclusively on the large blue chips such as Safaricom, EABL, Equity Bank, and KCB.

This year, the prices of these shares have gone up by between 18 and 32 percent, meaning that other than periodic profit-taking, most investors have been content to hold onto their stocks to benefit from the capital gains.

At the same time, June saw small and medium-sized stocks dominate the top gainers list.