In a recurring trend, foreign investors have withdrawn Ksh 178.2 million from the Nairobi Securities Exchange (NSE) in the past month, extending the capital flight that has persisted throughout the previous year. This prolonged period of withdrawals is attributed to a significant disparity in returns, with investments in advanced economies yielding higher profits compared to those in emerging and frontier economies. This trend follows notable interest rate increases by the central banks of these respective economies.
Data from the Capital Markets Authority reveals that foreign investors were net sellers at the NSE last year, marking a substantial net portfolio outflow of Ksh 21.2 billion. The bulk of these sell-offs occurred in March, totaling Ksh 10.6 billion. However, there were positive surprises in June and August when foreign investors turned buyers, acquiring shares worth Ksh 113 million and Ksh 672 million, respectively.
Despite indications of imminent interest rate cuts by major central banks, which could potentially redirect foreign flows to markets like Kenya, Ronny Chokaa, a senior research analyst at AIB-AXYs Africa, highlights that the interest rate differential still favors developed markets. The competition among emerging and frontier economies further shapes the direction and destination of these capital flows.
Chokaa remarked, “From our point of view, we think that interest rate differentials currently remain in favor of developed markets, and as such, we see more runway for further tightening of the policy rate to spark a reversal. However, competition from active bourses across peer frontier and emerging markets has also fueled intense rivalry for capital, especially in the wake of disruptive technologies such as AI.”
The ongoing exit of foreign investors has contributed to a prolonged period of low stock valuations at the NSE, influencing the market’s direction based on their substantial market turnover. In 2023, the NSE witnessed a 27.5 percent decline in paper wealth, amounting to Ksh 547 billion, with the market capitalization closing the year at Ksh 1.439 trillion.
Photo ( NSE via google)
By: Delino Gayweh
Serrari Financial Analyst
February 5, 2024
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
