Equity tops Q4 foreign outflows on profit taking

Equity Bank, Kenya’s largest retailer by customers, topped in quarter-four foreign outflows as investors booked gains on the counter that outperformed other big caps in 2014.

Data from Standard Investment Bank (SIB) shows Equity’s net outflows for the three months ended December stood at Sh2.59 billion. Carbacid that saw outflows of Sh860 million, BAT with Sh438 million and Bamburi with Sh186 million were the other large losers.

READ: Equity leads in net foreign outflows

The month of December saw heightened activity in the market, with turnover surpassing Sh30 billion for the first time in history in what analysts say was also due to investors shifting around portfolios between individual and nominee accounts in order to rebase (change) their purchase prices ahead of implementation of capital gains tax.

There was significant profit-taking too especially from investors looking to shift their portfolio to other investment classes.

“In December a number of big investors, both local and foreign, realigned their portfolios with activity, especially high on the larger counters. The commissions paid on the transfers are much lower compared to the tax they would pay if they transact their shares in future based on a purchase price from some years back,” said Old Mutual Securities analyst Eric Munywoki.

The tax is a net of five per cent of the difference between buy and sale price meaning the smaller the difference the less the tax.

The most affected by such moves would be counters that have seen huge price gains recently, including those with significant holdings by anchor shareholders who entered through IPOs.

Equity gained 62 per cent in share price in 2014 to Sh50, making it not only the biggest gainer among banks for the year but also the leading gainer among the top eight counters which have a market capitalisation of at least $1 billion each.

The SIB data shows that in the fourth quarter of the year, the other big counters saw significant foreign inflows in contrast to Equity.

East African Breweries Ltd (EABL) had net inflows of Sh2.65 billion, KCB had Sh2.57 billion while Safaricom had inflows of Sh1.18 billion. For the full-year ended December, the leading counter in net inflows was KCB at Sh10.4 billion, followed by EABL at Sh4.6 billion and KenolKobil at Sh848 million.

On the outflow side, Safaricom led with Sh3.3 billion, followed by Equity with Sh2.1 billion and BAT at Sh1.3 billion.

For the market as a whole, the fourth quarter net investment by foreign investors stood at Sh2.4 billion, up from Sh2.17 billion in the third quarter of the year. The full year net inflows for the market stood at Sh7.7 billion, which was a big drop from the record Sh34 billion recorded in 2013.

Market players are watching to see whether there will be any lingering effect in the market once the capital gains tax regime is fully effected.