NAIROBI, Kenya, Nov 2 – Foreign investors fled the Nairobi Securities Exchange (NSE) in the third quarter of 2022 as interest rates in developed economies continue to rise amid elevated global inflation.
According to the Capital Markets Authority (CMA) Q3 Statistical Bulletin, average foreign investor participation at the NSE in Q3 dropped to 45.55 per cent compared to 61.54 per cent recorded in Q2.
The investor flight saw the number of foreign corporate investors at the Nairobi bourse drop to 1,095 in the quarter under review from 1,150 in Q2.
Even so, the number of foreign individual investors at the NSE increased slightly from 13,745 to 13,769 in the third quarter.
In the equities market, equity turnover for Q3 stood at Sh22.74billion, compared to Sh26.24billion registered in Q2; a 13.33 per cent decrease.
“The equities market that has significant proportions of participation by foreign investors was affected by the global shocks currently at play,” CMA noted.
According to Morgan Stanley Capital International(MSCI), an analytical and research firm based in New York, dollar shortages compromise the ability of foreign investors to repatriate funds from investments in the local equity market.
This means that the weakening shilling amid a dollar shortage is reducing Kenya’s attractiveness to foreign investors.
Further, CMA noted that in Q3 the markets recorded a net foreign portfolio outflow of Sh6.9billion compared to an outflow of Sh10.8billion in Q2 but foreign participation fell to figures as low as 35.92 per cent, the lowest percentage since periods prior to January 2018.
The bulletin shows that the volume of shares traded also decreased by 5.39 per cent to 823.34 million in Q3 2022 compared to 870.20 million in Q2, indicating decreased activity at the bourse during the quarter under review.
On a positive front, the end-of-quarter market capitalization recorded a 3.18 per cent increase to Sh2trillion in Q3 up from Sh1.9trillion in Q2.
The Collective Investment Scheme (CIS) asset class also continued to register steady growth. As at June 2022, the total Assets Under Management by the CISes were Sh144.99billion, a 3.07 per cent increase from Sh140.67billion managed in the quarter ended March 2022.
The market invested the highest portion in Money Market Funds by up to Sh112billion, representing 78 per cent of the total assets followed by fixed income and other funds at 13 per cent and 6 per cent respectively.
Money Market Funds are preferred by investors because they are a low-risk investment channel.
During the quarter, the derivatives market showed increased activity and performance as measured by the number of deals, volume, and turnover of the derivative contracts traded at the NSE.
The turnover recorded a 4.15 per cent increase, closing the quarter at Sh30.53million compared to Sh29.31million recorded in Q2.
The number of deals also increased by 26.89 per cent in Q3, closing the quarter at 486 deals, up from 383 deals registered in the previous quarter.
