NSE Foreign Investor Participation Hits 6-Year Low

 

By Kepha Muiruri For Citizen Digital

The participation of foreign investors at the Nairobi Securities Exchange (NSE) hit a six year low in March as the external investors freed the market from renewed global volatility.

New data from the Capital Markets Authority (CMA) shows foreign investor turnover as the percentage of total NSE turnover fell to 47.89 per cent last month, the lowest level since February 2016.

“With increased global economic shocks, the market has suffered loss in its foreign investor participation levels in recent months,” noted the markets regulator in its first quarter soundness report published on Monday.

Volatility in the NSE this year has been underlined by the Russia-Ukraine war with the former’s invasion of the latter having left behind a Ksh.92 billion hole in the NSE market cap on February 24.

Historically, foreign investor participation has averaged between 60 and 70 per cent between 2019 and the first half of 2021.

Foreign investor sentiment has been further weighed down recently by fears of a potential resurgence in COVID-19 infections and the upcoming August 9 General Election.

The CMA however is at ease with the cyclical elections effects on the market and further expects volatility to end on the resolution of the Russia-Ukraine war.

“We believe the volatility will ease once the war is resolved. On COVID-19, our outlook is much better save for the resurgence of infections from a potential new variant,” said CMA Senior Manager, Policy and Regulatory Framework Jairius Muaka.

Between January and March this year, the foreign investors shed stocks worth Ksh.1.7 billion with the highest sell-off coming in March to further mirror the impact of the market's shock.

During the same quarter, the NSE turnover ratio also fell to its lowest in a year’s time at 0.365 per cent to further paint the effects of negative economic shocks in the market.

The NSE has been on a downward trajectory since the beginning of the year as investors weigh in the effects of prevailing volatility against the much improved performance of listed stocks.