Workers checking aerosol for export at a factory in China. Trade
tensions between Beijing and the US may result in global financial
markets instability. FILE PHOTO | NMG
The stock market is at risk of a return to foreign investor
flight that characterised the second half of 2018 should trade tensions
between the US and China continue to rise, analysts say.
The
foreign investors made net buys in the market for four straight months
between February and May this year, as they looked to take advantage of
falling share prices at the bourse.
Analysts now fear
this run could be risked by the simmering tensions between the world’s
two largest economies, whose trade tiff last year resulted in global
financial markets instability that made investors shy away from frontier
markets.
“Stocks registered their biggest pull back of
2019 as investors fretted over escalating trade tensions and the impact
on the fragile growth outlook. The selloff was replicated in the local
market as equities extended the April bearish run in May,” said
Commercial Bank of Africa in a market note.
Last month, all the main indices at the NSE were in the red despite the foreign investor buying.
The benchmark NS
The benchmark NSE 20 share index, which mainly tracks blue chip
stocks, ended the month 4.3 percent down, while the All Share Index
closed May 4.7 percent lower.
Turnover during the
month, however, rose to Sh12.47 billion from Sh9.85 billion in April,
indicating that some investors have seen an opportunity to buy at the
lower prices.
Analysts at Stratlink Africa, a risk and
research firm, say that there will be further opportunities to enter the
market during the current slide, something that may favour local
investors who are more price sensitive than foreign counterparts.
“On
the other hand, the currently low-priced equities offer an attractive
entry position for potential investors,” said Stratlink in its June
Africa market update report.
Local investors raised
their participation in the market as a percentage of turnover from 24.5
percent in April to 36.5 percent in May.
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