Panic As 42%(6,256) Foreign Investors Flee NSE In Just 9 Months

Throughout 2023, the Nairobi Securities Exchange (NSE) has faced a notable departure of foreign investors. A total of 6,256 investors have sold shares valued at Sh. 18.7 billion ($167 million) from January to October. The exodus has significantly impacted the market’s performance, resulting in the 20-Share Index and All Share Index experiencing declines of 9.9% and 25.2% respectively between October 2022 and October 2023.

Bloomberg has labeled the NSE as the weakest global stock market due to the all-share index’s fourth consecutive quarter of decline, marking the longest such streak since 2017.

The NSE, however, has defended its performance, asserting that Bloomberg’s assessment overlooks crucial factors like float adjustments and dividend yields.

The erosion of investor confidence can be attributed to factors like increasing interest rates and challenges within companies such as KCB Group Plc, coupled with Kenya’s growing debt burden.

Recent data from the Capital Markets Authority (CMA) reveals a significant drop in the number of foreign individual and corporate investors, plummeting from 14,877 in December 2022 to 8,621 by September 2023, indicating a 42% reduction.

Market capitalization has hit an 11-year low at Sh1.33 trillion ($11.8 billion), reflecting the combined impact of value erosion and a prolonged period of corporate earnings recession.

The MSCI Kenya Index has registered a year-to-date decline of 39.66% in Q3, according to CMA director Luke Ombara.

In October alone, foreign investors divested shares valued at Sh568.8 million ($5 million), contributing to net portfolio outflows since the onset of the Covid-19 pandemic in 2020.

Analysts at Genghis Capital attribute this trend to various factors, including rising global interest rates and a weakened Kenyan shilling, both of which have deterred foreign investment. Additionally, the number of local retail investors has notably diminished.

In response to these challenges, the CMA is advocating for measures such as day trading strategies, reducing barriers to foreign investment, and introducing market makers as intermediaries to facilitate NSE trading.

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