NSE investors lose Sh81.6 billion in paper wealth on slow activities

High foreign inflow but low trading activities dampened performance at the Nairobi Securities Exchange (NSE) in quarter ended June, with all indices closing in red, according to latest figures from the market regulator.

The Capital Markets Authority Q2 2019 Statistical Bulletin released on Wednesday shows the NSE All Share and NSE 20 Shares indices dropped by 5.11 per cent and 7.51 per cent closing the quarter at 149.61 points and 2,633.32 points respectively.

This saw investors at the Nairobi bourse lose Sh81.6 billion in paper wealth as the market capitalisation shrunk 3.46 per cent to Sh2.28 trillion compared to Sh2.23 trillion in the corresponding quarter last year.

Equity turnover during the review period stood at Sh32.89 billion, compared to Sh45.25 billion registered in the first quarter; a 27.31 per cent decrease confirming a decline in trading activity at the bourse.

Volumes of shares traded also decreased by 3.46 per cent to 1.08 billion compared to 1.4 billion in the first quarter.

This, despite the country recording a net foreign portfolio inflow of Sh1.36 billion compared to a heavy outflow of Sh8.17 billion reported in similar quarter last year.

Foreign investors bought shares worth Sh35.03 billion during the quarter and sold shares worth Sh34.32 billion.

Average foreign investors participation in Q2, 2019 accounted for 71.13 per cent compared to 61.72 per cent recorded in the first quarter, indicating a 9.41 per cent increase in foreign investor participation.

Local investors, a sum of East African institutional and individual investors however accounted for 79.09 per cent of shares held in the equity market with 20.91 per cent being held by foreign investors.

The shilling lost 1.23 per cent against the dollar to close the quarter at 102.29 but gained against the Stalling Pound and Euro.

On the other hand, the secondary bonds market resurged during Q2.2019, as turnover increased by 24.81per cent to Sh201.71 billion compared to Sh161.61 billion traded in Q1. 2019, indicative of the shift by investors from the equities market to the bond market as they sought to maximize on their portfolio returns.

A quarterly analysis indicates that, during the quarter, six Treasury bonds were issued in which the government sought to raise Sh140 billion.

It however received subscriptions worth Sh242.07 billion but in the end accepted to issue bonds worth Sh157.82 billion, indicating a 65.2 per cent acceptance rate.

‘’Notwithstanding the mixed performance of the secondary markets, outlook for the second half of the year remains bright in the advent of positive policy incentives,’’ CMA director, Regulatory Policy and Strategy Luke Ombara said.

He said the capital markets witnessed a number of milestones aimed at market deepening, notably: a surge in sign-ups by firms for the NSE Ibuka incubator and the M-Akiba Bond reopening.

Others are the Go-Live of the Derivatives Market; as well as the formal invitation of eligible applicants to the Regulatory Sandbox.