The Nairobi Securities Exchange (NSE) main index on Monday hit a 17-year low as foreigner investors depended their withdrawal from the equities market in the wake of the global coronavirus outbreak that has cut shareholder wealth by Ksh458 billion in a month at the Kenya bourse.
The benchmark NSE 20 Share Index, which captures the movement of select blue chip stocks like Safaricom, East African Breweries Limited (EABL), closed at 1,958.5 points after shedding 66.75 points.
The last time it was near this level was on July 24, 2003, when it closed at 1,948.5 points when Kenya was at the start of Mwai Kibaki’s administration, which is associated with the country’s economic resurgence and a stock market boom.
Analysts have argued that the sell-off is part of a global trend as investors dump stocks and seek shelter in fixed income assets including government bonds.
On Monday, the combined wealth of investors at the NSE shed Ksh72.3 billion ($720 million) to Ksh1.959 trillion ($19 billion)—the first time in nearly three years it has dropped below the Sh1 trillion ($10 billion) mark. Both the NSE 25 and NSE all share index also dipped.
Only 11 of the 45 equities that participated in trading yesterday posted gains as 30 companies shed value.
Dividend announcements by KCB, Equity Bank, Cooperative Bank, Standard Chartered Bank, Stanbic Bank, Kakuzi, Limuru and Umeme last week failed to pump investors’ confidence and lift shares.
Safaricom, Equity, East African Breweries, KCB and Co-operative Bank, where NSE investors have put at least 74.4 percent of their bourse wealth, all posted price declines Tuesday to collectively lose Ksh57.9 billion ($570 million).
Equity and KCB were the third and fourth highest losers on the bourse, shedding 8.34 percent and 7.64 percent respectively.
Safaricom investors lost Ksh32 billion ($320 million) followed by Equity ($120 million), KCB Group ($99 million and EABL ($27 million).
These stocks are favoured by foreign investors, partly due their steady dividends paying history.
Analysts reckon that foreign investors, who make up about 70 percent of daily trading at the NSE, have been net sellers in the past three weeks.
They have also been selling stocks in other markets, including the United States, Japan, the United Kingdom and Australia.
Genghis Capital senior research analyst Churchill Ogutu said the heavy plunge in prices is linked to events in the global markets as foreign investors exit and consolidate their holdings in their domestic markets.
The outbreak has wiped equity values due to mounting concern about stunted economic growth and corporate profits.
“Had we been in ordinary times, we could expect a bit of accumulation of shares by investors just before the dividend payouts are done. Most of the payouts will be in April, May and thereabouts but investors are not buying this,” said Mr Ogutu.
Countries across the globe have responded to the virus, which has infected 350,536 people and killed 15,328 persons, with lockdowns and curtailing public meetings. Numerous businesses such as bars, gyms and restaurants shutting down.
The scare is disrupting supply chains and weakening demand for goods and services worldwide, raising the spectre of a substantial reduction in global economic growth.
Kenya has confirmed 16 coronavirus cases, up from seven on Friday, prompting restrictions on travel and mass gathering and isolation rules
The government will from Wednesday cancel all international flights save for cargo planes. It has ordered the shutdown of bars and nightclubs, with restaurants only allowed takeaway services, put a freeze on churches and weddings and capped funeral gatherings to 15 people.
The social distancing rules imposed on businesses such as schools, bars and restaurants looks set to impact on consumer spending, setting the stage for job cuts and unpaid leave for workers struggling with reduced cash flow.
The government is yet to announce fiscal measures to save the economy amid increasing calls to extend tax reliefs to workers and employees.
Mr Ogutu reckons that a lack of clarity on a State-backed bailout is partly to blame for the stock market rout and exit of foreign investors.
“There has been a move for investors to hold cash and near-cash instruments to navigate the murky waters of Covid-19 as opposed to reinvesting in shares,” said Mr Ogutu.
“The bottoming out could happen when there is some sort of control in the spread of Covid-19, not just in Kenya but globally. This could bring foreigners back into the market.”
Local institutional investors were expected lead the pack in buying more shares as prices dip but analysts reckon that things are escalating quickly and making it hard for investors to make long-term decisions.