Foreign investors take out KSh 11.7 billion from NSE in Q1 2020

The Nairobi Securities Exchange (NSE) registered a foreign investors’ cash outflow of KSh 11.713 Billion in the first quarter of this year.

This compared to KSh 601 Million taken out of the bourse between January and March 2019. This drastic increase in outflows is attributed to panic sell-off by foreign investors seeking to exit the NSE for safer havens in the light of the global COVID19 pandemic.

In the period under consideration, foreign investor inflows was KSh 530 million compared to an inflow of KSh 1.357 Billion in the first quarter of 2019.

Figures from the Capital Markets Authority (CMA) indicate activity declined in the first quarter of this year with prices of shares traded falling across all counters.

According to a statistical quarterly report by the regulator, the 20.7 per cent drop in the NSE 20 Share Index mirrors corresponding declines in MSCI World, Emerging Markets and Frontier Market Indices oof 21.4%, 23.9 % and 27.7% respectively. Volumes traded also decreased by 4.90% to 1,360.48 Million in Q1. 2020 compared to 1,430.52 Million in Q1. 2019.

According to Mr.Luke Ombara, CMA Director, Regulatory Policy and Strategy, Q1, 2020 review was overshadowed by global shocks triggered by the COVID-19 pandemic.

He says in the quarterly review that Kenya was no exception to the ensuing financial contagion, with the first announcement of COVID-19 cases resulting in the NSE 20-share index shedding over 5%, prompting a market halt, sparked-off by panic selling in an already bearish market.

RELATED; Kenyan Stocks Plunge on Corona Virus Announcement

Between January and March this year, there was a decline in secondary equities market performance, with notable decline in prices of listed shares in the tourism, transport, manufacturing and agricultural sectors. Equity turnover stood at KSh43.70 Billion, compared to KSh.45.01 Billion registered in Q4.2019, even as volume of shares traded rose by 5.45% to 1.36 billion.

Market capitalization recorded a 7.94% decrease to KSh. 2.02 Trillion.

“It is noteworthy that recent upgrades to market infrastructure at the NSE and the CDSC as well as enhanced trading accessibility through technology, played a major role in sustaining high trading volumes in the NSE, even in the adverse COVID-19 environment,” said Ombara.

In the primary debt market, a quarterly analysis indicates that in Q1. 2020, six Treasury bonds were issued, with the Government seeking to raise KSh150 Billion; receiving subscriptions worth KSh147.61 Billion and accepting KSh. 114.53 billion, reflecting a 77.56% acceptance rate.

In the secondary market, bond turnover increased by 48.39% with KSh.157.98 Billion worth of bonds traded compared to KSh. 106.46 Billion traded in Q4. 2019, a pointer towards a shift by investors to safer assets.

The derivatives market, likewise, performed relatively well with 302 contracts traded, reflecting a 47.32% increase over the 205 contracts traded in q4 2019, with KCB Group Futures the most liquid with 138 contracts, followed by Safaricom with 47 contracts. Other contracts traded included Equity Bank, Absa Bank, British American Tobacco and the NSE 25-Share index Futures.

“Outlook for the quarter is stable buoyed by a mix of risk management interventions being undertaken to mitigate against identified exposures; good corporate results in selected counters; opportunities for diversification of portfolios across asset classes such as the Absa Gold ETFs, Real Estate Investment Trusts (REITs) based on long-term investment horizons, capital preservation strategies and renewed appetite for Treasury bonds,” said Mr Ombara.

How the NSE performs will, however, depend on how the Government uses its fiscal and monetary tools to cushion the most vulnerable businesses and individuals, especially the low-income earners and boost investor confidence.

Bond Market turnover at Nairobi Securities Exchange for Q1.2020 stood at KSh. 157.98 Billion, compared to KSh. 158.07 Billion registered in Q1.2019; registering a 0.06% decrease.

Safaricom remains the most capitalised at with a market capitalization of KSh 1.132.52 Trillion at close of Q1, 2020 followed by Equity KSh 162.52 billion, EABL KSh 147.08 billion, KCB KSh 141.41 billion, Co-op Bank KSh 81.45 billion, Stanchart KSh 66.01 billion, Absa Bank KSh 65.36 billion, NCBA KSh 48.73 billion, BAT KSh 44.60 billion and I&M Holdings KSh 42.93 billion.

RELATED: NSE Net Profit Falls 58%, Board Expects More Volatility