Foreign investors at the Nairobi Securities Exchange (NSE) in February recorded a net buying position for the first time in 16 months, taking positions on a number of blue chips with an eye on dividend and capital gain.
Market data compiled by Standard Investment Bank shows the foreign investors had net inflows of Sh219 million, with the bulk of the buys coming through Safaricom #ticker:SCOM and East Africa Breweries Ltd #ticker:EABL. In January, they had sold a net of Sh1.34 billion.
The February net buys have bucked a trend that has persisted since October 2017 where the foreigners were selling heavily to book profits and also to shift capital back to safe haven markets like the US where interest rates are rising.
Following the slide in the market last year—caused in large part by the foreign sales— valuations in the first quarter year have been deemed attractive for entry, thus the reversal in foreign flows.
“We expect increased market activity, and possibly increased inflows from foreign investors, as they take advantage of the attractive valuations,” said analysts at Cytonn Investments in the February markets review.
Overall, the market recorded net foreign sales of Sh29 billion last year, which was more than double the Sh12 billion sold in 2017. Due to the selloff, and the reduced activity by local investors, market capitalisation or paper wealth at the bourse fell by 17 percent or Sh419 billion last year to Sh2.1 trillion.
The NSE 20-share index also declined, by 23.7 percent to close 2018 at 2833.84 points compared to a gain of 16.5 percent the previous year.
This year, some of these losses have been reversed, mostly in February when large banks, EABL and Safaricom recorded price gains due to investor demand on their shares.
In the first two months of the year, investor wealth has gone up by Sh187 billion, with the NSE 20 share index up three per cent.