Investors at the Nairobi Securities Exchange (NSE) increased their traded volumes for bonds while equities volumes fell in the first quarter of 2021 in comparison to the corresponding period last year, as they continued to seek safety in fixed income assets in an uncertain economy.
NSE data shows that the volume of bonds traded between January and March stood at Sh199.4 billion, a 33 per cent increase on the Sh150.4 billion bonds traded at the NSE in the first quarter of 2020.
In contrast, the value of equities traded fell by 27 per cent from Sh43.6 billion in quarter one of 2020 to Sh31.8 billion in the first three months of this year.
Since the first case of Covid-19 was reported in the country in March 2020, heralding a period of restrictions and reduced economic activity, investors have tended towards government bonds to guarantee some returns at a time when other investment classes have struggled due to the poorly performing economy.
This has seen primary bond sales raise record amounts of bids, especially those of infrastructure bonds which have twice seen bids in excess of Sh100 billion in January and this month.
Those investors whose bids have been rejected by the Central Bank of Kenya (CBK) have been turning to the secondary bonds market at the NSE to buy the securities, this pushing up the traded volumes.
In the equities market, the hit on companies’ performance by the Covid pandemic has translated to falling share prices, which has in turn reduced investor trading activity, largely due to sellers being wary of offloading their stock at a loss.
The decision by many firms to withhold dividend payments, either due to a slide into loss making territory or as a capital conservation measure has also affected demand for shares.
Investors normally raise their demand for a particular stock when there are dividends on offer, while those already holding the shares get a chance to sell at a profit when prices go up due to the increased demand.