The Nairobi Securities Exchange (NSE) has been grappling with a significant exodus of foreign investors throughout 2023, with 6,256 investors selling shares worth Sh. 18.7 billion ($167 million) from January to October. This trend has contributed to a considerable depreciation in the market's indices, with the 20-Share Index and All Share Index losing 9.9% and 25.2% respectively between October 2022 and October 2023.
These developments have led to Bloomberg ranking the NSE as the worst global stock market, highlighting the all-share index's fourth consecutive quarter of decline - the longest since 2017. The NSE, however, has defended its performance, accusing Bloomberg of disregarding factors like float adjustments and dividend yields in their evaluation.
Investor confidence has been undermined by rising interest rates and issues such as bad loans at companies like KCB Group Plc and Kenya's escalating debt burden.
Today, data from the Capital Markets Authority (CMA) indicates a stark drop in foreign individual and corporate investors from 14,877 in December 2022 to 8,621 by September 2023, amounting to a 42% decrease. Market capitalisation has also hit an 11-year low of Sh1.33 trillion ($11.8 billion), reflecting the impact of value erosion and prolonged earnings recession among corporates.
The MSCI Kenya Index recorded a year-to-date decline of 39.66 percent in Q3, as noted by CMA director Luke Ombara. In October alone, foreign investors offloaded shares worth Sh568.8 million ($5 million), contributing to net portfolio outflows since the onset of Covid-19 in 2020.
Analysts at Genghis Capital attribute this trend to factors such as rising global interest rates and a weak Kenyan shilling, which have deterred foreign investment. The number of local retail investors has also significantly decreased.
In response to these challenges, the CMA is advocating for initiatives like day trading strategies, reducing investment barriers for foreign investors, and introducing market makers as off-takers to sellers to boost NSE trading.
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