NSE ranked second-best exchange in Africa despite foreign investor outflow

Money Markets

 

An NSE employee monitors the electronic trading on board. PHOTO | FILE 

By CHARLES MWANIKI

In Summary

• NSE has slowed down as dollar returns fall with the weakening of the shilling but its performance amongst six second-tier markets has been relatively good.

The Nairobi Securities Exchange (NSE) is the second-best performer this year amongst Africa’s large bourses despite recent foreign investor outflows.

NSE has slowed down as dollar returns fall with the weakening of the shilling but its performance amongst six second-tier markets has been relatively good.

The NSE All Share Index (NASI) which tracks the performance of all the stocks at the exchange is up 6.3 per cent this year at 173 points, while the NSE 20 share index is down 0.4 per cent at 5091 points.

READ: NSE 20 Index slips as profit-taking, price correction dampen major stocks

African Alliance (AA) market data on the All-Share indices of peer bourses in Africa shows the top performer is the Tunis Stock Exchange which is up 8.9 per cent for the year.

Morocco’s Casablanca Stock Exchange ranks third with a 3.3 per cent gain, followed by the Nigeria Stock Exchange which is up slightly at 0.06 per cent. The Zimbabwe and Egypt stock exchanges have negative returns for the year, down 3.9 and 10.9 per cent respectively.

Smaller stocks have been outperforming the bigger ones at the NSE in recent weeks, although analysts expect its performance as a whole to improve as corporate announcements pick up again.

“There still exist pockets of opportunities in the NSE thus we expect the bourse to reverse current momentum in the next few weeks with the biggest catalysts being the banking sector as listed lenders begin announcing first quarter earnings,” said Genghis Capital analyst Florence Kimaiyo.

“Liquidity and corporate actions that unlock value remain key factors to watch out for, especially with our high exposure to foreign investors but value in the mid-cap to small-cap counters cannot be overlooked.”

Data from AA though shows dollar returns of -2.9 per cent for the NSE in April, when the shilling depreciated sharply to the dollar by 4.2 per cent to exchange at 94.50.

In 2014, dollar investors at the NSE saw a gain of 13.6 per cent, which was however still below the NASI gain of 20 per cent.
The other bourses have recorded mixed performances in dollar returns over the past month. Nigeria is leading with a gain of 8.9 per cent followed by Tunisia at 7.12 per cent.

Nigeria is recovering after a presidential election that was hailed as a success. The poll has restored investor faith in the country’s economy.

On the other hand, Egypt and Morocco have negative dollar returns of 5.6 per cent and 0.6 per cent respectively. South Africa Johannesburg Stock Exchange that is rated the sole tier-one bourse in the continent, has a dollar return of 7.7 per cent.

Its JSE All Share Index is up 9.4 per cent in the past month. Foreigners looking to invest in a country carefully consider the dollar valuation against local currencies at entry and exit since this determines their margins.

A weakening local currency discourages their entry since it means investors get fewer dollars when exiting the market — leading to lower dollar return.