Foreign investor outflows at Nairobi Securities Exchange (NSE) hit Sh4.2bn in May

Foreign investors withdrew a net of Sh4.2 billion from the Nairobi Securities Exchange (NSE) last month, continuing the flight to western markets where interest rates have risen sharply in the last few months.

Net sales by foreign investors have been on the rise for the past three months, a period in which the US has increased its benchmark rates in line with a rise in inflation.

In March, they sold a net of Sh1.45 billion, rising to Sh1.74 billion in April and Sh4.2 billion last month.

Foreign investors normally trade almost exclusively on large blue-chip stocks at the NSE, with the selloff correlating to a fall in the share price of large firms such as Safaricom, BAT Kenya and Equity Group.

The telco’s stock shed 23% in May, ending the month at Sh26 per share, while BAT Kenya shed 6.3% to Sh420. Equity Holdings shed 5% to close May at Sh45.50 per share.

Safaricom’s stock accounts for 52% of the NSE’s total valuation of Sh2.004 trillion, meaning its movement influences the whole market’s performance significantly.

It is also the most traded stock at the NSE, being preferred by foreign investors in particular due to its large liquidity and solid fundamentals that have seen it defy market downturns in the past three years.

Traded turnover at the market last month recorded an upturn, hitting Sh10.8 billion from Sh5.9 billion in April.

This, however, remains lower compared to the turnover recorded in the corresponding month last year, when equity investors traded Sh14.2 billion worth of stocks. On the indices, the NSE 20 Share Index was down 6.6% during the month, while the All-Share index shed 14.3%.

The NSE 20 Share Index is price-weighted, meaning that blue ships with a high nominal price have a larger weight on their performance.

The All-Share index is on the other hand market-cap-weighted, giving companies such as Safaricom, Equity and EABL a bigger weight on performance, which explained its bigger decline during the month on account of Safaricom’s share price movement.