Safaricom’s stock fell 7.1 percent on Wednesday, helping to drive down the total value of listed shares by Sh70 billion to Sh1.857 trillion.
The telco’s share price closed at Sh20.90, down from Sh22.55 on Tuesday and marking a paper wealth fall of Sh64 billion.
Analysts attributed the sharp decline in the performance of Safaricom’s share price to higher exits by foreign investors who are now pricing in a deeper recession in the global economy than previously projected.
“This is not only a Safaricom issue but an emerging and frontier market issue. The consensus is that the recession is now going to be more severe than was previously expected,” noted Wesley Manambo, a research analyst at Genghis Capital.
“Foreign investors are liquidating their positions at whatever price to build buffers by selling off in frontier and emerging markets. They are flooding the market with more shares that there are takers among local investors leading to the share price decline.”
Safaricom share price is usually the most impacted NSE stock when foreigners flee, boasting of both the highest market capitalisation and equity turnover according to the latest market statistics.
The data for instance shows Safaricom had an average turnover of Sh2.462 billion between October and December last year while its average market capitalization stood at Sh982.94 billion.
Expectations on further interest rate hikes in advanced economies including the US have rekindled the reversal of portfolio flows by foreign investors to home markets driving down valuation of stocks and bourses in emerging and frontier markets.
Domestically, foreign investors have remained net sellers over the last three years driven in one part by the Covid-19 crisis and spooked by a rising interest rate environment on the other.
For instance, foreign investors recorded outflows of Sh24.4 billion across 2022 to mark an expansion from net outflows of Sh10.2 billion a year earlier.
The foreign investors however cut exits last month to Sh382.4 million after disposing of stocks worth Sh2.86 billion in January.
Safaricom’s recent interim dividend announcement at the end of last month has failed to offer support for the stock. The book closure for the dividend is set for Wednesday next week.
The interim payout was however trimmed by Sh2.4 billion to Sh.058 following a 10 percent slide in its net profit through six months to September last year with the decline largely attributable to the company’s increased capital spending in Ethiopia.