Capital Markets

Sh125 billion lost at NSE in a day on foreigners flight


Nairobi Securities Exchange (NSE). FILE PHOTO | NMG

Stocks listed on the Nairobi Securities Exchange #ticker:NSE (NSE) lost Sh125 billion of their value Monday as foreign investors continued to flee blue-chip firms over the coronavirus, making it the single largest drop in a day at the bourse’s history.

The market capitalisation closed at Sh2.2 trillion compared to Sh2.3 trillion on Friday, with Safaricom #ticker:SCOM and the big banks leading in shedding value in the wake of the sell-off.

The blue-chip stocks are a favourite of foreign investors who over the past few weeks have sold their equity holdings across the globe as they seek shelter in fixed income assets, including government bonds.

“The market is falling primarily because of risk aversion by foreign investors in the wake of the coronavirus,” said Martin Mwirigi, an analyst at Standard Investment Bank (SIB).

Safaricom’s share price declined 7.2 percent –one of its largest drops in a single day— to Sh27.35. This saw the company shed Sh86 billion of its market value.

At some point during the trading day, the telecom operator’s stock fell by the maximum margin of 10 percent to lows of Sh26.55, underlining investors’ rush to reduce their exposure.

Safaricom was followed by KCB #ticker:KCB , which fell seven percent to Sh46.7, shedding Sh11.4 billion of paper value.

The country’s biggest bank is expected to announce its results for the year ended December on Thursday.

East African Breweries Limited #ticker:EABL (EABL) declined six percent to Sh195.25, wiping off Sh9.9 billion of its market value.

Equity Group #ticker:EQTY receded 5.8 percent to Sh46.2, erasing Sh10.8 billion of its market capitalisation.

Co-op Bank #ticker:COOP saw its share price drop 4.3 percent to Sh14.15, capping off the losses among the large capitalisation stocks as the lender’s market value declined by Sh3.8 billion.

A report by KCB Capital shows that foreign investors made net sales of Sh955 million yesterday across five stocks, with Safaricom leading the outflows at Sh616.5 million.

The renewed selling pressure, which erased the rebound seen last week, has taken the market’s return over the past 12 months to a negative 12 percent as measured by the drop of the benchmark NSE 20 Index.

The sell-off is seen to reflect investors’ fears that the global economy will take a major hit from the coronavirus, which has paralysed economic activities in parts of China.

Other countries to which the disease has spread such as Japan and Italy have also responded by curtailing public meetings, with scores of businesses shutting down plants and stores.

The scare is disrupting supply chains and weakening demand for goods and services worldwide, raising the spectre of a substantial reduction in global economic growth.

The coronavirus has killed more than 3,800 people and infected over 110,000 since the outbreak in December in China’s port city of Wuhan.

Yesterday, trading was halted on the New York Stock Exchange for 15 minutes after the S&P 500 index fell seven per cent while Britain suffered a new ‘Black Monday’ after the FTSE 100 bombed by £140billion (Sh18.4 trillion) in minutes — as world markets collectively crashed because of the virus.

The biggest fall in the price of oil since the 1991 Gulf War because of a trade war between Saudi Arabia and Russia has further spooked traders with a global recession now on the cards.

At the NSE, the fears have outweighed expectations of dividend payments starting April for most companies whose financial year ended in December.

The market sell-off continues to lift the dividend yield of firms that make cash distributions to their shareholders, offering an attractive entry opportunity for those seeking incomes.