The Nairobi bourse is the third worst-performing major stock market in Africa since January, hit by foreign investor capital flight and ease of repatriation of equity sales compared to other capitals in the continent.
The Nairobi Securities Exchange (NSE) was ranked eighth among the 10 top stock markets in the continent with a return of negative 30 percent in dollar terms since the year started, wiping out Ksh789 billion of investor wealth
Ghana and Egypt tied as the worst-performing markets with returns of negative 32 percent in ranking that put the Nigeria Stock Exchange as the top performer on 21 percent returns, market analysis done by investment bank EFG Hermes shows.
The performance of African stock markets has recently been weighed down by a reduced appetite for emerging markets after a jump in interest rates in the developed markets such as the US, which are currently battling high inflation that has forced their central banks to adjust rates upwards.
This flight of capital to the US market — where inflation is at a 40-year high of 8.6 percent —and other developed nations has triggered steep price falls of African blue-chip firms listed that are a favourite of foreign investors.
Kenya has suffered more pain, given that its market is dominated by foreigners—who account for 55 percent of turnover—and the lack of restrictions on moving foreign exchange in and out of the country.
On the other hand, it has been difficult to move capital from Nigeria, forcing investors to either stay put or rebalance their portfolios within the market.
“Despite a reported dollar scarcity locally and in several other African countries, the Kenyan market seems to be the least restrictive in terms of dollar access and hence makes it easier for foreigners to sell off. Additionally, the NSE is fairly liquid compared to other regional exchanges,” said Solomon Kariuki, head of research at AIB-AXYS Africa.
The value of NSE has fallen to lows last seen in 2017.
The value of all stocks stood at Sh1.847 trillion compared to Sh2.636 trillion at the start of the year, while the NSE main index has dropped to a 19-year low on foreign investors’ flight.
The NSE-20 Share Index closed at 1,580 points, a level last seen in 2003.
First published by Business Daily. Read more here