NSE investors lose Sh87b in paper wealth as foreigners exit
By K24 Editorial, July 29, 2019Zachary Ochuodho @zachuodho
Nairobi Securities Exchange (NSE) lost Sh86.52 billion in paper wealth during the second quarter of this year due to foreigners exiting the market, citing tough business environment in the region.
The loss, analysts said was exacerbated by unwillingness of the local investors to participate in the equity market, choosing to transfer investments to the bond market in a bid to earn more.
Moses Waireri, Associate Vice President, Frontier Research at EFG Hermes, a leading investment bank, said the decline during the April 1 to June 30 period was caused by two incidences.
He identified these as exit of foreigners from the equity market in a bid to look for frontiers markets such as Morocco and unwillingness of the local investors to participate in the equity market.
“The reason for the slow participation is what has been causing excess liquidity in the market – which is also causing the shilling instability,” he said.
Capital Market Authority (CMA) Quarterly Capital Markets Statistical Bulletin – Quarter two, 2019, indicates that the equity turnover for the period under review stood at Sh32.89 billion, compared to Sh45.25 billion registered in Quarter one, a 27.31 per cent decline, confirming a slow down in trading activity at the bourse.
However, while the equity market declined, the bond market turnover increased by 24.81 per cent with Sh201.71 billion worth of bonds traded compared to what had been traded in the previous quarter.
Blue chip stocks
The NSE 20-Share Index, which captures movement of select blue chip stocks fell to 213.67 points, while the NSE All Share Index (NASI)declined by 5.11 per cent. Volume of shares traded also declined.
Market capitalisation, which measures the investors wealth, too shrunk to Sh2.28 trillion from Sh2.361 trillion registered in April 1, when the second quarter started.
Sterling Capital Analyst, Elizabeth Njenga explained that the shift by investors from the equities market to the bond market was occasioned by the urge to maximise on their portfolio returns.
During the period, East Africa Breweries Ltd (EABL) lost Sh17.39 million followed by KCB Bank, the largest bank by asset base, which shed off Sh12.72 million, Barclays Bank lost Sh8.42 million, Equity Bank shed off shares worth Sh7.36 million, while Co-op Bank shed off shares worth Sh3.52 million.
However, Standard Chartered Bank defied the trend among the large counters with share price going up during the three months.