Foreign investors extended their exit from the Nairobi Securities Exchange (NSE) into the quarter to March this year, new market data shows, despite a gradual improvement in the performance of local equities.
The data shows that the foreigners’ portfolio flows were negative across all three months with the highest selloff coming in March at Sh1.2 billion.
In January and February, the investors took out Sh106 million and Sh1 billion from the market, respectively.
The continued exits are despite tailwinds, including gains in the domestic exchange rate and improved investor sentiment on the sovereign, following the partial redemption of Kenya’s debut $ 2 billion (Sh264.85 billion) Eurobond.
As such, the continued exit by foreigners has been a puzzle especially with the NSE returning gains for investors so far into the new year.
For instance, investor wealth at the bourse has increased by Sh327 billion since January 2, 2024, while the Nairobi all-share index has marked a 22.7 percent jump to 113.09 from 92.11 points on December 29, 2023 points during the same period.
According to Muathi Kilonzo, head of Equities at EFG Hermes Kenya, dealings among foreign investors have been significant where some, previously unable to exit due to foreign exchange availability constraints, have left the market recently to mirror the selloff position.
“What you are seeing is foreigners dealing among themselves. There are investors who were trapped when dollars were not available while there are foreigners seeking to take a profit after the gains in stock seen so far this year,” he said.
“Some foreigners who had exited in recent years have also been making a comeback.”
BlackRock, the world’s largest asset management firm, for instance, made an investment in the NSE for the first time after a four-year hiatus.
Central Bank of Kenya (CBK) Governor Kamau Thugge disclosed that Kenya is among 10 economies on the continent earmarked for investments by the behemoth.
“BlackRock actually made an investment into equities and if you are keen and have been looking at what’s happening in the stock market, you can start to see it has been going up,” the CBK boss told a bankers' forum in March.
The NSE has marched forward in the opening three months regardless of the negative foreign portfolio flows.
Liberty Kenya Holdings has been the unlikely leader of a market rally with its stock price climbing 48.5 percent to Sh5.48 as of March 28 compared to Sh3.69 on December 29.
Other top gainers have included Equity Group which has rallied by 40.1 percent to Sh47.15 in the same period and Co-operative Bank which has gained by 31.5 percent to Sh15.
Home Africa had led the market laggards, returning a year-to-date loss of 18.9 percent to trade at 30 cents from 37 cents at the end of last year.
Other losers so far have been Kakuzi Plc, BK Group, Express Kenya, Longhorn Publishers, Nairobi Business Ventures and Unga Group.
Despite the double-digit gains for the stock market, analysts have stayed off calling the rally a bull run which describes a prolonged period of rising stock prices and investor sentiments.
“The rule of the thumb in calling a bull run is that there must be a persistent/constant upside of valuation returns in two consecutive quarters,” noted AIB-AXYs Africa Senior Research analyst Ronny Chokaa.
