Safaricom dividend plan spurs foreign inflows at NSE in Aug

Safaricom CEO Bob Collymore (left) and chairman Nicholas Ng’ang’a during the telco’s annual general meeting at the Bomas of Kenya in Nairobi on Friday. PHOTO | FILE 

By GEOFFREY IRUNGU, girungu@ke.nationmedia.com

In Summary

• Net foreign inflows stood at Sh3.7 billion or nearly four times the Sh978 million realised in July.

Net inflows from foreign investors hit an year-to-date high in August underscoring the attraction of Safaricom’s planned dividend payout and the raging bear market to overseas bargain hunters.

According to data from Standard Investment Bank (SIB), net foreign inflows stood at Sh3.7 billion or nearly four times the Sh978 million realised in July. In August last year net overseas inflows stood at Sh914 million.

Net inflows have been generally low at less than Sh1 billion a month this year. They have mostly ranged between Sh300 million and Sh900 million monthly.

In August, most of the inflows, amounting to Sh2.3 billion, bought into Safaricom shares. The telco has declared a special dividend of 68 cents and the annual dividend of 76 cents, totaling Sh1.44 a share — its highest-ever payment in a single year. Both dividends are payable on December 1.

“The Safaricom dividends and improved prospects for the company has been attracting foreign investors into the company. So they want to reap the dividends that will be paid,” said Paul Mwai, chief executive of Nairobi-based brokerage firm AIB Capital.

Books for both dividends closed last Friday, an action that could lead the company’s share price to fall significantly from this week.

READ: Safaricom’s Sh27.5bn dividend payout plan sparks share price rally

Other companies that attracted significant overseas investment were East African Breweries at Sh555 million, Equity Bank at Sh444 million and Kenya Reinsurance Company at Sh226 million.

Mr Mwai said foreigners were also looking at the valuations of the NSE-listed stocks. With the bear market, the ratios including price-to-earnings and price-to-book of many stocks are below their historical levels, serving as an invitation to buy for cash-rich investors.

Even as September began, foreign investors had shown indications that they were keen to buy stocks.

“Foreign investors assumed a net buying position by accounting for 85.6 per cent of total market purchases and 80.8 per cent of total market sales,” said Dyer and Blair Investment in its report to clients last Friday.

Mr Mwai said local retail investors were not keen on the market because of the recent fall, mostly due to the introduction of restriction on banks interest rates, as some had lost money. Even institutional investors were asking hard questions before investing, he said.

“To invest in the listed firms, even for institutional investors, it is no longer a straight-forward matter.

“Trustees are asking fund managers difficult questions. They have to be sure that the fund managers are doing the right thing,” said Mr Mwai.
Raymond Kipchumba, research analyst at brokerage ABC Capital, said besides Safaricom’s dividends, the release of six-month results and the declaration of interim dividends by a number of firms had also fuelled the increased foreign investors’ interest in the market especially given the improved valuations.

“The situation is such that the local investment industry is not strong enough to push a bull run. A situation where you also have election in 11 months makes a difficult investment environment,” he said.