NSE on rebound despite decline in foreigners inflows

A trader monitors stocks at the NSE. The stock market reversed its decline in June to gain 4.1 per cent in July. FILE 

By CHARLES MWANIKI

The stock market reversed its decline in June to gain 4.1 per cent in July, brushing aside reduced inflows from foreigners who have been key participants at the bourse.

Local investors were main drivers of trading at the Nairobi Securities Exchange (NSE) last month, according to data released on Thursday by the exchange.

Foreign inflows decreased to Sh1.71 billion in July from June’s Sh2.67 billion, mainly as a result of the local investors taking positions on key finance sector stocks in anticipation of good half-year results.

“The month started slowly in terms of demand, but turnover picked up later on the back of earnings expectations especially in the financial sector, coupled with bargain hunters coming in to pick up the stocks which had lost value in June,” said Kestrel Capital market analyst Kuria Kamau.

(Read: Investors’ bet on bank stocks raises NSE trade volumes)

The July rebound has seen the bourse reverse the 8.2 per cent drop in share prices recorded in June, with the NSE-20 share index closing July at 4,787 points, 189 points higher than at the end of June.

Market capitalisation also recorded an upswing, settling at Sh1.727 trillion at the end of July, a monthly gain of Sh109 billion above the Sh1.618 trillion recorded on June 28.

Some investors had also been alerted to the risk of market- wide sell off in June, and sought to divest their holdings early in an attempt to lock in accumulated gains.

The resurgence has lifted the bourse back to the market capitalisation level at the end of May of Sh1.72 trillion, although the NSE 20-Share Index remains nearly 200 points below the May closing level of 5,006 points, as a result of gains being spread across all 54 stocks and not just the NSE 20-Share Index constituents.

In comparison, the NSE-All Share Index registered a higher gain of 5.6 per cent in July compared to the 20-Share Index’s 4.1 per cent, with both indicators having been down an equal 8.2 per cent in June.

In the week ending July 26, local investors were active on ARM, Barclays Bank and StanChart Bank, while foreign demand was high on KCB and Equity shares.

Analysts have said that expectation is that banks’ earnings for the second quarter should be better than the first quarter due to the absence of political risk that characterised the first three months of the year during which the general election was held.

“The second quarter has seen increased demand for loans and we expect a modest growth in loan books across the banks,” said ABC Capital in a market analysis note.

Housing Finance which recorded a 62.8 per cent growth in net profits has also been experiencing increased demand ahead of its book closure on a Sh0.75 interim dividend on Friday.