Market News

Foreign investors recoil from NSE on political temperature

Nairobi Securities Exchange staff monitors trading at the bourse. FILE PHOTO | NMG
Nairobi Securities Exchange staff monitors trading at the bourse. FILE PHOTO | NMG 

The participation of foreign investors in the Nairobi Securities Exchange (NSE) has remained stuck below the 60 per cent since June thanks to growing jitters, newly released data from the Capital Markets Authority (CMA) show.

The CMA put the level of participation at the NSE by the foreigners at 57.94 per cent in June, 49.14 per cent in July, 57.05 per cent in August and 55.69 per cent in September.

The number stood at 63.4 per cent in May compared to 72.41 recorded in April.

This contrasts with the 72.41 per cent recorded in April, 76.87 per cent in March, 73.37 per cent in February and a high of 79.81 per cent in January.

Officials attributed the fall in the third quarter to investor jitters due to political uncertainties surrounding the elections.

“During the period foreign equity outflow stood at Sh11.1 billion on the back of heightened political uncertainty in the country, but is expected to rebound, as long as the current situation does not become protracted,” said Luke Ombara, CMA director, regulatory policy and strategy.

Several African bourses saw an upswing. 

“Clearly within this generalised upswing across sub-Saharan Africa frontier markets we are witnessing more investors adopt a more granular and nuanced strategy and I think with the elections looming and political risk elevated, foreign investors became a lot more picky and Kenya suffered because of that,” analyst Aly-Khan Satchu said.

The data shows there was a marked slowdown in foreign investor purchases in the third quarter of the year. The investors were net sellers in recent months.

The capital markets in the overall exhibited resilience despite the uncertainty during the electioneering period as the equity market performance registered improved performance.

Equity turnover increased to Sh53.58 billion in the third quarter of this year compared to Sh48.14 billion in the same quarter last year with the NSE 20 and All-Share indices both maintaining an upward trend, rising by 18.62 per cent and 15.67 per cent respectively.

Further, investor wealth as reflected by end-period market capitalisation increased by 20.69 per cent to Sh2.37 trillion, compared with Sh1.96 trillion in same quarter of last year.

A continuation of the trend was witnessed on Friday after all the benchmark indices at the NSE closed in the red for the fourth week in a row, as investor jitters continued to bite.

The top foreign net outflow list was dominated by banking stocks led by Equity Bank and Co-op Bank.