Foreign investors sold a net of 50.8 million KCB Group shares worth Sh1.44 billion at current prices in the year to June 2023, the bulk of, which were taken up by State-owned pension fund NSSF.
Latest shareholder filings published by the NSE-listed bank show that the volume of shares in the hands of foreign investors dropped to 281.65 million by the end of June, from 332.52 million units a year earlier, while those held by NSSF rose to 312.7 million from 272.6 million units.
This means that the effective stake in the lender held by foreign investors dropped to 8.77 percent from 10.35 percent in the period, while that of NSSF rose from 8.78 per cent to 9.73 percent.
The pension fund is one of the anchor shareholders of KCB alongside the National Treasury, which retains a 19.76 stake in the lender, equivalent to 635 million shares.
KCB is ranked fourth at the Nairobi bourse by market capitalization at Sh92.86 billion and is sixth in number of issued shares at 3.21 billion units, hence its attraction to foreign investors who make large ticket trades and eye firms with solid fundamentals.
However, unlike the top three stocks —Safaricom, Equity Group and EABL— KCB is no longer listed on the Morgan Stanley Capital International (MSCI) Frontier Market Index, which is used as a key guide by foreign investors when putting capital into the Kenyan stock market.
KCB, which was previously on this index, was instead dropped to the MSCI Frontier Markets Small Cap Index from mid-2021, giving it less visibility among foreigners eyeing the NSE.
The sales by the foreigners have also coincided with a period of general foreign exits from the local bourse as part of a wider flight of capital to Western markets, particularly the US, due to global economic uncertainty.
Rising interest rates in developed markets due to the regulatory reaction against high inflation have also pulled capital from emerging and frontier markets, hurting stocks that have high exposure to foreign investors.
In the 12 months to June 2023, foreign investors made net sales worth Sh27.24 billion at the NSE, contributing to the current depressed share prices that have pulled the NSE 20-Share Index to a two-decade low.
These sales have, however, opened an opportunity for local institutional and retail investors to take a position in blue chip firms at fair prices, setting themselves up for regular dividends and the potential of capital gains down the road.
KCB’s share however came under selling pressure in the first half of this year from dividend seekers after becoming the only tier-one bank to cut its 2022 payout—to Sh2 per share from Sh3 in 2021—due to regional acquisition costs. This was despite a rise in net profit by 19.5 percent to Sh40.8 billion in the year.
