Investors in shares trading on the Nairobi Securities Exchange (NSE) lost Sh226.10 billion in paper wealth last week largely on bearish sentiment and a sell-off on Safaricom and KCB counters by foreign funds chasing higher returns in developed markets.
Market capitalisation — the value of all stocks on the Nairobi bourse— slid to a fresh low of Sh1.61 trillion last Friday compared with Sh1.84 trillion the week before, according to NSE data.
Analysts largely blamed the 12.31 percent fall on a considerable sell-off by foreign investors on the Safaricom counter amid the weakening shilling against the dollar.
“Our whole market is driven by Safaricom and there are one or two big off-shore investors who have been exiting Safaricom over one or one and a half weeks. That has affected the stock market as a whole,” Kenneth Minjire, a senior associate for debt and equity at stockbroker AIB-AXYS, said on phone.
“The sell-off by offshore clients is driven by developments in their own countries [growing returns in developed markets] and locally there is also political noise [after the opposition called for mass action against the government from this week over runaway cost of living] which they are sensitive to.”
Safaricom, which accounted for 81.42 percent of NSE’s traded value last week, shed Sh170.28 billion of its value or three-quarters of the total market loss during the week.
The share price of the firm, a darling of investors looking for exposure in East African Community’s relatively lucrative mobile money and telecoms market, fell to Sh16.35 from Sh20.60 a week earlier.
That means an investor with 10,000 shares in the giant telco recorded a Sh43,000 decline in paper wealth in a week, a drop traders and analysts attributed to the persistent bearish sentiment by foreign investors on emerging and frontier markets despite fundamentals remaining solid.
For example, America's central bank, known as the Federal Reserve, a fortnight ago signalled the possibility of another increase in benchmark interest rates when it meets this week in a bid to fight inflation.
Resultant higher returns on bonds in advanced markets have attracted foreign investors from frontier markets such as the NSE over the last year or so as they view such securities as safe havens in times of global uncertainty.
KCB, which was one of the blue-chip counters that were hardest hit by the flight by foreign investors in the past one year, shed the second-largest value on the NSE last week.
The lender’s share price closed Friday at Sh31, the lowest since mid-August 2020 when Covid-19 was pounding the credit markets.
KCB shed Sh20.73 billion of its value, with Sh19.44 billion or 93.78 percent of the plunge coming in two days after the lender cut its dividend payments for 2022 by a third to Sh2 per share.
The lender blamed the reduced payout on the expenditures it has made in regional acquisitions, including most recently in the Democratic Republic of the Congo.
