Foreign investors made record net sales of Sh29 billion from the Nairobi Securities Exchange (NSE) last year as the market was caught up in global capital flight back to the US.
Market data compiled by Standard Investment Bank shows that large blue chip counters led in the net outflow column, led by Safaricom at Sh13.7 billion.
The US Federal Reserve has been raising its benchmark rates, causing global investors to move cash from frontier and emerging markets to the developed markets.
The NSE has also been affected by falling share price valuations, which has negatively affected the dollar returns for investors — given that the shilling has remained largely stable against the greenback — causing investors to try book their gains and seek alternative investments.
“We expect the market to remain subdued in the near-term as international investors exit the broader emerging markets due to the expectation of rising US interest rates, coupled with the strengthening of the US dollar,” says Cytonn Investments in its latest market report.
In 2017, foreign investors also had a net selling position at the NSE of Sh12 billion. Foreign participation as a percentage of traded turnover at the bourse, however, remained unchanged year-on-year at 63 per cent.
Equity turnover stood at Sh175 billion last year, having gone up by 2.4 percent from Sh171 billion in 2017.
Most of the foreign activity, the SIB data shows, was centered on the large blue chips which are the favourite of foreigners due to their high liquidity that supports large ticket trades. Other than Safaricom #ticker:SCOM, large counters with significant net foreign outflows included KCB #ticker:KCB at Sh7.8 billion, EABL #ticker:EABL (Sh4.3 billion), Equity Holdings #ticker:EQTY (Sh3.1 billion) and KenolKobil #ticker:KENO (Sh1.9 billion).
On the net inflow side, Britam #ticker:BRIT led at Sh701 million, followed by Barclays Kenya #ticker:BBK (Sh513 million), Standard Chartered #ticker:SCBK (Sh501 million) and BAT Kenya #ticker:BAT (Sh417 million).
As a result of the selloff, and the reduced activity by local investors in the market, market capitalisation or paper wealth at the bourse fell by 17 percent or Sh419 billion last year to Sh2.1 trillion.
This also reflected on the NSE 20-share index, which declined by 23.66 percent to close 2018 at 2833.84 points compared to a gain of 16.5 percent in the previous year.