EXIT

NSE lost Sh176 billion in Q1 on investor flight

Initial public offerings (IPOs) plummeted globally in the first quarter of this year after a record showing last year.

In Summary
  • Average foreign trading in the equity market was 54.8 per cent, down from 57.7 per cent recorded in the previous quarter.
  • The low activities especially in the stocks market are not just in Kenya
Image: /COURTESY

The upward review of the federal rate in the US and the ongoing rift between Russia and Ukraine dealt a blow to trading at the Nairobi Securities Exchange (NSE) in the first three months of the year.  

According to the Capital Markets Soundness Report for a period between January and March, market capitalisation at the Nairobi bourse dropped to Sh2.43 trillion compared to Sh2.6 trillion same period last year.

This wiped out Sh176 billion off counters as foreign investors left to invest in high-value offshore ventures abroad.  

"The performance of the capital markets continues to be impacted by the growing list of global economic shocks that continue to tilt the macroeconomic environment within which all operations and investments are anchored,'' CMA boss Wyckliffe Shamiah said. 

Average foreign trading in the equity market was 54.8 per cent, down from 57.7 per cent recorded in the previous quarter.

A net equity outflow of Sh1.69 billion was recorded in the same period, an improvement, compared to an outflow of Sh5.32 billion, in spite of the impact of the Russian invasion of Ukraine during the quarter.

The turnover ratio averaged 0.35 per cent down from 0.46 per cent recorded in the previous quarter signaling persistently low liquidity levels.

"Despite a relatively volatile macroeconomic environment, we continue to encourage increased investment in the domestic market by both institutional and retail investors as the success of our markets greatly depends on our involvement across all asset classes," Shamiah said.

The volatility of the Nairobi All Share Index (NASI), NSE 20 and NSE 25 share indices for the quarter under review as of March 25 remained low at 0.60 per cent, 0.28 per cent and 0.45 per cent respectively.

This was an increase for the indices except for the NSE 20 Share index whole volatility fell by 0.09 per cent when compared to performance in Q4.2021

In spite of this, the Kenyan Government continued to utilise the domestic capital markets for fundraising with a total of Sh260 billion raised in the quarter under review, mainly in funding its development budget.

The government sought to raise a total of Sh216.50 billion and received bids worth Sh264.9 billion. The government accepted bonds worth Sh203.28 billion, indicating an aggregated 76.74 per cent acceptance rate.

The low activities especially in the stocks market are not just in Kenya

Bloomberg reports for the first quarter of 2022 show that Initial public offerings (IPOs) plummeted globally in the first quarter of this year after a record showing last year.

The volatility stoked by the war in Ukraine and soaring inflation set investors on edge and inhibited deals.

"These sentiments have equally translated to depressed capital markets activity in the international capital markets with minimal initial public offerings recorded in Q1.2022," CMA said. 

About $65 billion has been raised via IPO around the world so far this year, down 70 percent from $219 billion in the first three months of last year.

This puts the global market on track for the lowest quarterly proceeds since the onset of the Covid-19 pandemic in 2020.