Capital Markets

Foreigners pull out Sh2.7 billion from securities exchange


Stockbrokers at the Nairobi Securities Exchange. FILE PHOTO | NMG

The Nairobi Securities Exchange (NSE) experienced increased foreign selling pressure in February with net outflows for the month topping Sh2.7 billion ($26.3 million).

Data from Standard Investment Bank (SIB) showed foreign investors had turned net sellers during the month compared to net buyers in January when net inflows amounted to Sh533.1 million (or $5.3 million).

The outflows came against global market uncertainty amid the spread of the corona virus with the NSE indices continuing on a downward trend and the benchmark NSE 20 hitting a 16-year low last Friday.

Among the major contributors to the bear market is Safaricom – whose market cap is nearly half of the total — which was 6.7 percent down last week and 11.4 percent since the beginning of the year.

“The benchmark indices sustained their downward momentum for the third consecutive week, on protracted price downturns. Safaricom declined 6.7 per cent week-on-week and -11.4 percent year to date (YTD) to end the week at Sh27.90,” said SIB. Last Wednesday alone, Safaricom shed nearly 5.2 percent to stand at Sh28.20 before falling further to Sh27.90 a share.

Analysis by Genghis Capital showed that foreigners have been net sellers for weeks, noting that the expectation was a downward market correction for the equities market in the first half of this year.

The investment bank noted that foreign investors were net sellers for the third subsequent week posting net outflows of Sh300 million compared to outflows of Sh1.3 billion in the previous week.

The NSE 20 Share Index, NSE 25, NSE All-Share Index were all down in the year to date, showing that the correction was well under way. Even on month and quarter to date, NASI was down indicating the extent to which the bears rule the market.

“Our expectation [is] of a downward market correction in the equities market during first half of 2020 …We are witnessing increased foreign selling pressure, with occasional bouts of uncertainty,” said Genghis Capital in analysis this week.

Genghis Capital noted further the prices of the key counters were fluctuating between the resistance and support levels. Support is the price level at which a downward trend pauses because investors perceive it to be low enough to enter, thereby causing a rise in demand at that point. The resistance level is that point where investors have sold off to the extent that they can sell no more without precipitating an increase in price.

Genghis said that with the uncertainty, investors are tending to fluctuate between the resistance and support levels on the key traded counters that have continued to dominate the market for years now.