The Nairobi Securities Exchange (NSE) has witnessed a substantial exodus of foreign investors in 2023, with 6,256 investors divesting shares valued at Sh. 18.7 billion ($167 million) from January to October. This ongoing trend has contributed significantly to the depreciation of the market’s indices, with both the 20-Share Index and All Share Index registering losses of 9.9% and 25.2%, respectively, between October 2022 and October 2023.
These developments have not gone unnoticed, as Bloomberg recently ranked the NSE as the world’s worst-performing stock market. They highlighted the all-share index’s decline for the fourth consecutive quarter, making it the longest such streak since 2017. In response, the NSE defended its performance, claiming that Bloomberg’s evaluation overlooked factors such as float adjustments and dividend yields.
Investor confidence has been severely undermined by several factors, including rising interest rates and issues like non-performing loans at companies like KCB Group Plc, coupled with Kenya’s escalating debt burden.
According to data released today by the Capital Markets Authority (CMA), foreign individual and corporate investors have seen a significant drop, decreasing from 14,877 in December 2022 to 8,621 by September 2023, representing a 42% decrease. Market capitalization has also hit an 11-year low of Sh1.33 trillion ($11.8 billion), reflecting the combined impact of value erosion and a prolonged earnings recession among corporate entities.
The MSCI Kenya Index, as noted by CMA director Luke Ombara, recorded a year-to-date decline of 39.66% in Q3. In October alone, foreign investors offloaded shares worth 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 witnessed a significant decline.
To address these challenges, the CMA is advocating for initiatives such as day trading strategies, a reduction in investment barriers for foreign investors, and the introduction of market makers as off-takers to sellers to bolster NSE trading.
