NSE stays in the red for third week in a row as foreign investor sales continue

The Nairobi Securities Exchange (NSE) #ticker:NSE remained in the red for the third consecutive week as sales of blue chip stocks by foreign investors weighed down overall performance of the bourse.

All three market indices are pointing south, with the blue chips dominated NSE 20-Share Index the worst performer at -1.7 percent, closing Friday at 2,543 points. The NSE All Share Index (NASI) was down 0.2 percent during the week, while the NSE 25-index shed 0.3 percent.

The NSE 20-Share Index, which has remained stuck at a 10-year low for the three weeks, was unchanged in Tuesday’s trading.

The NASI rose marginally by 0.5 points to 148.59 while the NSE 25 Index gained 2.6 points to 3,575.2. The market was closed on Monday for the Idd-Ul-Adha holiday.

Given their dominance in trading at the NSE, foreign investors have been largely behind the market’s downturn.

“Reversing last week’s foreign inflow position, foreign investors turned bearish, registering net outflows of $290,000 (about Sh29.8 million). Their participation stood at 74.9 percent, almost at par with last week’s level of 72.7 percent,” said Standard Investment Bank (SIB) in its weekly market report released Tuesday.

The international investors have generally been on the sell side in the past two months, taking out Sh2.05 billion worth of net sales last month and Sh903 million in June.

Investor wealth

Investor wealth as measured by market capitalisation has, however, gone up during the past week, gaining Sh19.6 billion to Sh2.27 trillion at close of trading y, boosted mainly by gains on the Safaricom and Co-operative Bank stocks that balanced out price falls from other blue chip counters.

Over a one-year period, however, investor wealth at the bourse has eroded by Sh253 billion, having stood at Sh2.523 trillion as at early August 2018.

The NSE’s blues in recent weeks have also been largely attributable to underperforming large counters, with banks especially hit as they came off their dividend season.

Local investors who hold 80 percent of the issued stocks in the market have also been reluctant traders due to the current depressed share prices.

Equity turnover fell by half last week, to Sh1.1 billion week-on-week, attributed by SIB to reduced trading across most large caps.

Safaricom was the most traded counter, accounting for 61.1 percent of total market activity.

Analysts at investment bank Genghis Capital say that banking stocks are going to be at the forefront of determining the market’s direction as they release their half-year to June results in the coming weeks.