Foreign investors troop back to the NSE

Foreign investors have begun returning to Kenya’s local stock market halting portfolio exits seen largely in 2020.

According to new market statistics covering the month of January, foreign investors have turned net buyers in the year so far with a net buying position of Ksh.616 million ($5.6 million).

This to end a three month run in net portfolio outflows between October and December last year.

The return of the foreign investors who represent the bulk of trading at the Nairobi Securities Exchange (NSE) (at 66 per cent in Q4 2020) has coincided with an overall lift to stocks in the year to date.

For instance, the Nairobi All Share Index (NASI), the NSE 20 and NSE 25 have gained by 2.3. 0.7 and 0.6 per cent respectively.

The rebounding performance has been driven by gains in large caps stocks such as BAT, Bamburi and Safaricom which have gained by 12.5, 11.5 and 4.7 per cent respectively.

Last year, foreign investors dumped Ksh.28.6 billion worth of stocks with the parties seeking shelter against volatility occasioned by the COVID-19 crisis.

The height of foreign investor exits came in March when outflows topped Ksh.9.1 billion in a month after Kenya reported its first corona virus case.

Subsequently, the NSE ended the year among the top ten worst performing indices with the poor performance being attributed to the foreigners’ exits.

The NSE is however tipped to see greater tidings this year supported by the return of foreign investor inflows alongside an improving macro-economic environment.

The investors are nevertheless expected to favor placements in Safaricom and banking stocks according to market analysts.

“In 2021, we expect a recovery in the equity market buoyed by an increase in foreign investor inflows. We expect increased investor focus on Safaricom and banking stocks. In 2021, the banking sector is likely to record an increase in earnings as lower non-performing loans (NPLs) growth lead to a decrease in provisions,” analysts at AIB-AXYS Africa said in a note.

Moreover, Kenya’s additional weighting by 3.2 per cent on the MSCI emerging markets index in November last year is set to act as an additional bait to net inflows from foreign investors.

Volatility on the pace of economic recovery, rising public debt and heightened political activity is seen dampening the foreign flows.

“We see foreign investors concerned by prospects of business recovery, sovereign debt levels and likelihood of heightened political activities with a referendum in 2020 and general election in 2021,” said analysts at Genghis Capital.

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