The Nairobi Securities Exchange (NSE) last year outperformed most African markets in dollar returns despite the bear run, helped by the Kenya shilling’s gain on the dollar versus the depreciation seen on most regional currencies.
The year was bruising for African stock markets, which recorded negative returns on the back of general foreign investor sell-offs as capital flowed back to the safe-haven western markets especially the US.
Market data compiled by African Alliance shows the NSE FTSE 15 Index — which tracks the bourse’s 15 largest firms by market capitalisation and is mainly used by foreign investors — had a dollarised return of -13.5 per cent last year. It outperformed the bourses of Nigeria (-20.6 per cent), South Africa (25.5 per cent), Uganda (-17.2 per cent), Tanzania (-15.4 per cent) and Egypt (-14.2 per cent).
“The region experienced capital outflows as profit-taking investors exited the markets to realise the gains made in various sectors as at quarter one 2018, such as oil and gas that had been boosted by a global rally in crude oil prices, and the financial services sector,” said Cytonn Investments in a review of the regions markets.
“The price correction due to the capital outflows coupled with the depreciating currencies resulted in most exchanges registering a decline in performance.”
Foreign investors made record net sales of Sh29 billion from the NSE last year, data compiled by Standard Investment Bank shows, the highest yearly outflow in the market.
Dollar investors, upon conversion of sales proceeds to hard currency when exiting a stock, can either make a currency gain or loss depending on whether the local currency has strengthened or weakened to the dollar in the duration they have held the stock.
Investors in Kenya were spared the currency loss after the shilling bucked the continental trend to end the year with a 1.4 per cent gain on the dollar. For the other major markets, their currencies ended the year with depreciation of between one and 15 per cent.