Foreign investors withdrew a net 4.2 billion Sh4.2 billion from the Nairobi Securities Exchange (NSE) last month and continued their flight to Western markets, where interest rates have risen sharply in the last few months.
Net revenue from foreign investors has been rising over the past three months, a period in which the US has raised its benchmark interest rates in line with rising inflation.
In March, they sold a net of 1.45 billion Sh, rising to 1.74 billion in April and 4.2 billion last month.
Foreign investors usually trade almost exclusively on large blue-chip stocks on the NSE, where sales are linked to a fall in the share price of large firms such as Safaricom, BAT Kenya and Equity Group.
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The telecommunications company’s share fell 23 percent in May, ending the month at Sh26 per share, while BAT Kenya fell 6.3 percent to Sh420. Equity Holdings fell five percent to close in May at Sh45.50 per share.
Safaricom’s share accounts for 52 percent of the NSE’s total valuation of Sh2.004 trillion, which means that its movement significantly affects the performance of the entire market.
It is also the most traded stock on the NSE, and it is particularly preferred by foreign investors because of its high liquidity and solid fundamentals, which have seen the defiant market declines over the past three years.
The traded turnover on the market registered a recovery last month and hit Sh10.8 billion from Sh5.9 billion in April.
However, this is still lower compared to the turnover recorded in the corresponding month last year, when equity investors traded shares for 14.2 billion Sh14.2 billion. On the indices, the NSE 20 stock index fell 6.6 percent during the month, while the All-Share index fell 14.3 percent.
The NSE 20 stock index is price weighted, which means that blue vessels with a high nominal price have a greater weight on their performance.
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The all-share index, on the other hand, is market cap-weighted, giving companies like Safaricom, Equity and EABL a greater weight on performance, which explained its larger decline during the month due to Safaricom’s stock price movement.
The Al Share index, on the other hand, is market value weighted, giving companies like Safaricom, Equity and EABL a greater weight on performance, which explained its larger decline during the month due to Safaricom’s stock price movement.