Foreign investors at the Nairobi Securities Exchange (NSE) turned net sellers in October, removing Sh1.28 billion despite the market rallying on possibility of removal of interest rate cap.
The net sell-off position broke ranks with August and September, which had seen net buying of Sh1.51 billion and Sh827 million respectively as the share prices of most stocks tanked.
A market summary for October compiled by Standard Investment Bank (SIB) showed Equity Bank #ticker:EQTY had the highest sell-off (Sh2.1 billion) followed by East African Breweries #ticker:EABL and Co-operative Bank #ticker:COOP at Sh246.5 million and Sh37.5 million respectively.
The net sell-off position was despite the NSE market capitalisation gaining Sh197.68 billion between October 17th and 31st as investors priced in the possibility of removal of rate cap laws.
Credit to the private sector is expected to grow at a faster pace and earnings for banks to jump on the removal of the cap.
AIB Capital head of research Sarah Wanga said foreign investors had generally been cutting their exposure in frontier and emerging markets even though some started buying back bank stocks in the second half of October.
“They have been exiting emerging and frontier markets like Kenya mainly because of risk aversion. They fear for trade wars and how that will affect global economy and they are therefore moving towards safer assets,” said Ms Wanga.
“But we have seen them slowly buy bank stocks in the second half of October, raising their exposure to take advantage of possibility of reversal of the rate cap. This is unlike in first half.”
Foreign net buying during the month came from Safaricom #ticker:SCOM (Sh761 million), KCB #ticker:KCB (Sh276.6 million) and Diamond Trust Bank #ticker:DTK at Sh41.2 million but was not enough to save the bourse from closing the month in foreign net-selling position.
Despite the net-sell-off, foreign investors still remain in net buying position (Sh937 million) January to October. This sets the market for a possible year of net buying position for the first time since 2017.
Capital Markets Authority data show foreign investor net sell-off hit Sh22.96 billion last year, nearly doubled from Sh11.58 billion in 2017.