In a significant market development, foreign investors have offloaded shares worth Sh1.1 billion on the Nairobi Securities Exchange (NSE) last month, according to recent market data. This marks a noticeable resurgence in sell-offs from foreign investors, reversing the trend seen in August when offshore investors recorded a rare net buy position with portfolio inflows amounting to Sh668 million.
Foreign investors had mostly remained net sellers throughout the year, except for brief buying episodes in June and August. However, the recent sell-off is attributed to the continued surge in interest rates in advanced economies. This trend has prompted foreign investors to redirect their investments towards their home markets, which are currently offering comparatively higher returns.
While the US Federal Reserve opted to keep interest rates unchanged during its September meeting, it hinted at a prolonged period of stable interest rates and indicated a potential interest rate hike before 2024. Following suit, several central banks in advanced economies, including the European Central Bank, raised interest rates to all-time highs in mid-September to curb rising consumer prices.
With interest rates in advanced economies expected to remain elevated for an extended period, investors are positioning themselves to capitalize on these higher returns, causing them to withdraw from frontier and emerging markets like the NSE.
Stacy Makau, a research analyst at AIB-AXYS Africa, commented on the situation, stating, “The sell-offs in September are driven by the US raising their rates, which has made investments in advanced economies more attractive than in the frontier markets.”
Since the beginning of the year, foreign investors have divested shares worth a staggering Sh18.7 billion on the NSE, with the largest exits occurring in March, totaling Sh10.6 billion.
This surge in foreign sell-offs has had a substantial impact on the NSE’s performance, resulting in significant losses for the market. Year-to-date, the Nairobi All Share Index, NSE 20, and NSE 25 have returned losses of 25.2%, 9.9%, and 21.2%, respectively.
Furthermore, the participation of offshore investors as a percentage of equity turnover has declined significantly in recent months. This participation rate decreased from 59.54% at the end of December 2022 to 40.45% as of June this year, reflecting the ongoing exit of foreign investors from the NSE.
The situation remains fluid, and market analysts will closely monitor the evolving dynamics in the coming months as foreign investors continue to navigate the shifting global economic landscape.
Photo Source: Google
October 4, 2023
By Delino Gayweh
Serrari Financial Analyst
Article and News Disclaimer
The information provided on www.serrarigroup.com is for general informational purposes only. While we strive to keep the information up to date and accurate, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the website or the information, products, services, or related graphics contained on the website for any purpose. Any reliance you place on such information is therefore strictly at your own risk.
www.serrarigroup.com is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information on the website is provided on an "as-is" basis, with no guarantee of completeness, accuracy, timeliness, or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
In no event will www.serrarigroup.com be liable to you or anyone else for any decision made or action taken in reliance on the information provided on the website or for any consequential, special, or similar damages, even if advised of the possibility of such damages.
The articles, news, and information presented on www.serrarigroup.com reflect the opinions of the respective authors and contributors and do not necessarily represent the views of the website or its management. Any views or opinions expressed are solely those of the individual authors and do not represent the website's views or opinions as a whole.
The content on www.serrarigroup.com may include links to external websites, which are provided for convenience and informational purposes only. We have no control over the nature, content, and availability of those sites. The inclusion of any links does not necessarily imply a recommendation or endorsement of the views expressed within them.
Every effort is made to keep the website up and running smoothly. However, www.serrarigroup.com takes no responsibility for, and will not be liable for, the website being temporarily unavailable due to technical issues beyond our control.
Please note that laws, regulations, and information can change rapidly, and we advise you to conduct further research and seek professional advice when necessary.
By using www.serrarigroup.com, you agree to this disclaimer and its terms. If you do not agree with this disclaimer, please do not use the website.
www.serrarigroup.com, reserves the right to update, modify, or remove any part of this disclaimer without prior notice. It is your responsibility to review this disclaimer periodically for changes.
Serrari Group 2023
