Nairobi Securities Exchange (NSE) foreign investors withdrew a record Sh29.01 billion in 2020, highlighting the extent of Covid-19 induced economic disruptions that saw investors dump equities.
The foreigners, who make up about 70 percent of daily trading at the NSE, turned net sellers for all the months except January, August and September as they cut exposure equities in search for shelter in fixed income assets, including government bonds.
Data from AIB-AXYS Africa and Capital Markets Authority show that the net selling is in contrast with last year when foreign investors’ returned into a net buying position of Sh1.378 billion from the previous net selling of Sh22.97 billion in 2018.
The selling was triggered by the discovery of the first Covid-19 infection in Kenya in mid-March, with the month seeing the highest net selling (Sh9.06 billion) compared to other months.
Genghis Capital senior research analyst Churchill Ogutu reckons that local investors have also been cautious with money given the job losses and salary cuts that have left them with less income.
“Many Kenyans have little to spare to invest and for those who have, the preference is precautionary savings products over riskier capital markets asset class,” said Mr Ogutu.
Foreigners intensified the selling due increased risk aversion and the reduced attractiveness of equities as Covid-19 abyss continued to batter the fundamentals of many companies.
About Sh24.65 billion or 84.9 percent of the cumulative net selling for the year happened between March and July, as government imposed strict measures such as dusk-to-dawn curfew and ban on public gatherings to stem the spread of the virus.
Fundamentals of top blue chips firms such as Safaricom, Equity, KCB, East African Breweries and Cooperative Bank all came under pressure as earnings dropped.
Kenya started relaxing Covid-19 control measures in July, bringing some calm in the market as August and September saw net buying of Sh100 million and Sh802 million respectively.
However, fresh surge in Covid-19 infections in the last quarter of the year has seen foreigners return into a net selling position, pulling out Sh3.05 billion.The combined wealth of investors at NSE is at Sh2.319 trillion, down Sh220.7 billion when compared to last year.All the three indices—NSE 20, NSE 25 and NSE all share—is down 30.2 percent, 17.4 percent and 9.3 percent respectively.Some 15 companies have so far rung profit warnings, preparing investors for a more than 25 percent decline in net earnings.Only nine out of the 62 NSE stocks have posted gains this […]