The monthly equity turnover at the Nairobi Securities Exchange (NSE) fell by a third in July, indicating a reluctance by investors to let go of their stock at a time when share prices have been on the up at the market.
The NSE said turnover fell to Sh9.3 billion last month from Sh13.95 billion in June, a 33.5 percent drop that reflected reduced activity on the large blue-chip counter that dominates trading at the market.
On average, turnover has been lower this year compared to 2020, despite share prices going up. Ordinarily, investors tend to cash in and book their capital gains when share prices rise, but not if they see prospects of even higher prices going forward.
Since the beginning of the year, the benchmark NSE-20 Share Index has recorded a gain of 5.7 percent, while the all-inclusive NSE All Share Index is up 17.3 percent.
Foreign investors also cut their selling activity in July, recording net outflows of just Sh60.85 million compared to Sh1.6 billion in June.
These investors have significantly cut their exits from the Kenyan stock market this year compared to 2020 when they made record outflows.
In the first seven months of the year, net foreign outflows at the NSE stand at Sh4.9 billion, compare to net sales worth Sh21.4 billion in the corresponding period of last year.
While the rising share prices are a boost for investors who have endured a nearing market for the last five years, market intermediaries are looking at lower earnings due to the fall in turnover this year.
They derive their income from brokerage commissions charged on trades, charging on average about 1.8 percent per trade although this can be negotiated lower for trades worth above Sh100,000.
Those with strong bonds trading desks can, however, recoup some commissions from the higher bonds turnover being recorded this year. In the first seven months of the year, bonds worth Sh470.6 billion have been traded at the NSE, up from Sh294.6 billion in the corresponding period last year.
Brokers levy a commission of 0.03 percent per bond trade handled.