Local investors can make the NSE stableFriday January 06 2023
Foreign investors pulled out a total of Sh23.9 billion from the Nairobi Securities Exchange (NSE) in 2022, marking the highest outflows in the past three years, as they exited from the market triggered by the global economic crisis.
The annualised portfolio outflow from domestic equities was the highest since 2020 when foreign investors withdrew Sh28.6 billion from local stocks on Covid-19 shocks.
The net selling position is the third in consecutive years with the last year of net inflows coming in 2019.
The impact of the outflows was felt by the investing public, driving down stock valuations of blue-chip companies, and forcing some companies into share buybacks to protect their value.
For instance, Safaricom which represents the largest stock at the NSE by average market capitalisation, shed 36.4 percent of its value to close 2022 with a share price of Sh24.15 from a closing price of Sh37.95 a year earlier.
Other large-cap stocks which felt the heat of a falling market and retreating foreign investors were Equity, KCB and Co-operative which shed 15.6, 16.2 and five percent of their share prices.
The 2023 global forecast suggests that recovery may take a little longer.
This means that market actors must now look more inwards and encourage more action from local investors to stop the bear run that is wiping away billions every month.
This is important, especially in a year when the government plans to sell shares in ten companies.
The NSE should take lessons from the tourism industry that has now embraced the domestic market after taking a hit from the Covid-19 travel bans.