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MARKET REPORT

Investor flight wipe out Sh844 million from NSE in Q4

In Summary
  • The outflow was also linked to global trade uncertainty witnessed during the quarter, especially the US-China trade war, forcing investors into the wait and see the corner.
  • Even so, the level of volatility of the market as evidenced by the NSE 20 Share and NASI index, remained relatively low during the quarter.
An investor looks at the digital board at the Nairobi Stock Exchange(NSE)/FILE
An investor looks at the digital board at the Nairobi Stock Exchange(NSE)/FILE

Foreign investor flight at the Nairobi Securities Exchange (NSE) witnessed in October and November persisted in December, pushing Q4 outflow to Sh844 million compared to an inflow of Sh262 million in the previous quarter.

The Q4 Capital Market Soundness Report released Friday shows foreigners at the Nairobi bourse rushed to sell their stocks especially in the banking sector, which gained after the country repealed the interest cap law initiated in September 2016.

Renaissance Capital had, for instance, tipped Co-op Bank’s shares to rise by the biggest margin by end of the year, gaining 36.1 per cent to achieve a target price of Sh21.40. Equity Bank’s share has been projected to go up 21.4 per cent to hit Sh58.30 while KCB was expected to rise by 17.6 per cent to stand at Sh56.50 per share.

 

The outflow was also linked to global trade uncertainty witnessed during the quarter, especially the US-China trade war, forcing investors into the wait and see the corner.

Average foreign investor participation during the quarter averaged at 62.96 per cent, almost two per cent decrease from 64.95 per cent recorded in Q3.2019 and the lowest ratio for the last four quarters.

The market regulator has however termed the drop in foreigners’ activities at the NSE as a positive, will be rolling out a plan to onboard more domestic institutional investors and High Net Worth Individuals (HNWIs) into the secondary market and Collective Investment Schemes (CIS) to reduce the dominance of foreign investors.

‘’While foreign investor participation within the Kenyan market positions us as a global competitor, the Authority notes that the sustainability of the Capital Markets is equally dependent on participation by domestic investors- both retail and institutional,’’ the report read in part.

The market dominance by five major counters at NSE rose to the highest level in the year, hitting 73.35 per cent compared to 71.8 in Q3, 70.8 in Q2 and 67.8 per cent in the first quarter.

Market concentration remains a key risk within the Kenyan Capital Markets landscape, with Safaricom’s accounting for at 50 percent of the market activities. Other dominant players include Equity Bank, KCB Group, East Africa Breweries Limited and British American Tobacco (BAT).

Even so, the level of volatility of the market as evidenced by the NSE 20 Share and NASI index, remained relatively low during the quarter though with a slight increase in December 2019.

 

''The market has remained relatively stable following the handshake with minimal shock – economic, regulatory and political,’’ CMA report said.

It added that the repeal of Section 33b of the Banking Act in November was welcomed by the industry.

The NCBA Group, Home Africa and Barclays Bank Kenya shares gained the most during the quarter at 23, 22.4 and 21.3 per cent respectively while those of Nairobi Business Ventures, Transcentury, and Kenya Airways nosedived 22.2, 20.8 and 19.6 per cent respectively.