All Nairobi Securities Exchange indices ended August in the red as prices of major stocks continued to fall amid selling pressure from foreign investors.
Data compiled by Standard Investment Bank (SIB) shows that the benchmark NSE 20 share index was down 2.8 per cent during the month, while the All Share and the NSE 25 share indices fell 1.7 and four per cent respectively.
Turnover was, however, up during the month compared to July at Sh10.2 billion from Sh9.75 billion, which would translate to higher commissions for intermediaries.
The market was once again dominated by foreign investor activity, with the category accounting for 62.2 per cent of total turnover in the month.
These investors recorded net sales of Sh1.5 billion, largely on blue chip counters on which they concentrate most of their activity.
“The equities market performance during the month was driven by declines in large caps stocks such as EABL, Equity Holdings, Barclays Bank, DTB and KCB Group, which declined by 11.6, 10, 5.2, 5.0 and 4.1 per cent, respectively,” analysts at Cytonn Investments said in their monthly report for August.
The foreign investors are also motivated to cash in due to the higher dollar returns in the local market—due to a stronger shilling this year—compared to peer markets where weaker currencies have eroded the gains investors would earn in these markets.
The selloff and price downturn at the NSE is part of a wider global trend which has seen investors turn to safe haven markets, notably the US where rising interest rates are making the world’s biggest economy an attractive investment destination.
The Capital Markets Authority last month cautioned that foreign investor sells are a risk to the local market, noting that while they are driving up the turnover in the short term, they carry a risk of reduced activity in the longer term if the foreigners were to eventually shun the market in chase of higher yields elsewhere.
This year, foreign investors have been selling more than buying, leading to accumulated sell-off of $193.3 million (Sh19.5 billion) in the eight months to August.
The worst months were in February and May with net sales of Sh5.14 billion and Sh4 billion respectively.