NAIROBI, November 3 – Net outflows by foreigners are to blame for the bearish run that has dogged the Nairobi Stock Exchange (NSE) for the better part of the year, bourse Chief Executive Officer Chris Mwebesa said on Monday.,
He said foreign participation was initially at 18 percent early in the year, increasing during the Safaricom initial Public Offering, before it hit a high of 54.85 percent by end of September, mainly characterised by foreign investors cashing out.
Mr Mwebesa said: “The fall can partly be attributed to the withdrawal of foreign investors from the market to more safer investments such as government securities denominated in US dollars.”
He however was quick to reassure investors in the NSE that fundamentals of most listed companies had not changed significantly and thus the future for the market could only be bright.
Local investors, he said, had also sold off securities as rising inflation and the resultant higher borrowing costs had impacted negatively on their disposable income.
Mr Mwebesa pointed out that trading volumes remain at Sh6 billion compared to Sh22 billion in June this year, an indicator that most investors were holding onto their positions which could further mean a bottom out soon.
“As a market this does not worry us because we are sure it will change, it only raises concern for us as a business,” he said.
Some financial advisors have been encouraging investors to buy more shares during this period or hold onto their shares as a way of weathering the storm.
The NSE 20 share index has so far lost 1983.49 points, dropping 38 percent to 3183.69 points.
But compared to the Egyptian, Nigerian and Johannesburg Stock Exchanges, the NSE has lost only 2.50 of its market capitalisation compared to 18.32 percent, 5.65 percent and 31.05percent for the other exchanges respectively.
Mr Mwebesa predicted positive economic prospects for the bourse citing the depreciation of the shilling which makes the country’s agriculture exports more competitive and a more affordable tourism destination.
As a result of such prospects, listed entities should remain robust as depicted in the latest earnings by some of the selected 20-Share Index constituent companies.
“If you look at most company half year results majority have performed quite well and it’s our expectation that they will continue to do so once things stabilise because their fundamentals haven’t changed significantly,” Mr Mwebesa said.