Foreign investors withdrew Sh11.2 billion from the Nairobi Securities Exchange #ticker:NSE (NSE) in February and March, leading to a sharp fall in the value of blue chip stocks like Safaricom and Equity Bank Group.
The foreigners, who make up about 70 percent of daily trading at the NSE, turned into net sellers in the two months as part of a global sell-off during investors dumped stocks and sought shelter in fixed income assets, including government bonds.
A market summary for Quarter One compiled by the Standard Investment Bank (SIB) showed that foreigners pulled out Sh9.1 billion in March when the Coronavirus pandemic hit most countries outside China. Earlier in February, they had sold shares worth Sh2.76 billion, some of it as part of profit-taking.
Their net buying in January stood at Sh555 million when the market was expected to outperform last year.
Besides Kenya, investors have also been selling stocks in other markets including the United States, Japan, the United Kingdom and Australia.
Stocks favoured by foreign investors and which make up the NSE-20 share index like Safaricom #ticker:SCOM , Equity Bank Group #ticker:EQTY, EABL #ticker:EABL and Bamburi Cement #ticker:BAMB shed values in Quarter One, which ended March 31, slashing the value of shares at the Nairobi bourse by Sh523.9 billion in the three months to March.
The SIB analysis showed that Safaricom had the highest sell-off by foreigners (Sh4.9 billion) followed by KCB Group #ticker:KCB (Sh3.9 billion), Equity (Sh1.76 billion) and Co-operative Bank at Sh183.7 million.
Seven out of the top 10 net foreign outflow counters in March were banks — KCB, Equity, Stanbic, Cooperative #ticker:COOP, Absa Bank Kenya #ticker:ABSA, Standard Chartered Bank #ticker:SCBK and DTB #ticker:DTK.
Their combined foreign sales amounted to Sh4.2 billion.
Genghis Capital senior research analyst Churchill Ogutu said the NSE started the year on a high note but the plunge started in March when the first case of Coronavirus was confirmed.
“Stocks like KCB and Equity were partly affected by profit-taking in between but the last knock was Covid-19 fears which accelerated the fall,” he said.
“Right now it is more about investor fears as opposed to fundamentals of respective companies.”
At the NSE, the fears outweighed expectations of higher dividend payments for most companies whose financial year ended in December.
Banks have announced their results with most increasing the amounts they intend to pay as dividends.
KCB shares declined 35.2 percent in Quarter One to Sh35 while Equity Bank was down 36.5 percent to Sh33.95. Safaricom, the jewel of foreign investors, fell 16 percent in the three months to March to Sh26.40. The NSE says the bourse is now a buyers’ market, a pointer that investors seeking future capital gains can buy stocks now.
“The NSE continues to encourage investors to take advantage of the buyers’ market,” said Mr Geoffrey Odundo, the chief executive of the bourse.
Only six counters reported gains in the quarter with 55 stocks posting a drop in share prices.
The gainers were Carbacid with 12.5 percent rally, followed by Eagaads, BOC, Limuru Tea, Olympia and Uchumi. These stocks are less popular with foreign investors and this shielded them from market erosion triggered by the foreigners’ flight from the Nairobi bourse.
“Ideally, the big stocks are the most liquid and are popular with foreigners. Small stock were supported by local retail investors who came in and saw opportunities,” said Mr Ogutu.
The benchmark NSE 20 Share Index, which captures movement of select blue chip stocks like Safaricom, Kenya Power and East Africa Breweries Limited, closed at 2,337 points, down from 2,409 on Thursday. It last was near this level on September 26, 2003, when it closed at 2,328 when Kenya was at the infancy of the Narc administration, which is associated with Kenya’s economic resurgence and a stock market boom that created many millionaires.
The 22.6 percent drop in the bourse still kept it above the Nigeria and Egypt stock markets, which were down 23 and 29.7 percent respectively.
“NSE recovery is still largely pegged on how this Covid-19 develops and how the government stimulus package evolves. That is what foreigners will be following keenly,” said Mr Ogutu.