African Alliance
Genghis Capital
Standard Investment Bank

Foreigners remove Sh5.3bn at the NSE Investors cash in on the blue chips since mid-April

Foreign investors have made net sales of Sh5.3 billion from the stock market in the last month on profit-taking activities, putting pressure on stock prices and pushing the main index down by six per cent over the period.

Data compiled by Standard Investment Bank shows that since mid-April, these investors have been cashing in on the blue chips, mainly Safaricom on which weekly net sales have ranged from Sh850 million to Sh1 billion.

Analysts at Genghis Capital at the end of last week said there has been a net selling trend on the largest counters at the NSE for a number of sessions.

“The foreign desk was mainly interested in trading Safaricom, EABL, KCB, Equity and Barclays…exuding net selling activity. This has been the trend for the past 12 consecutive sessions,” said Genghis Capital in a market note last week.

Prices in the market had risenin the first quarter of the year, rewarding investors who had taken an earlier position with handsome capital gains.

Since the beginning of last month, however, there has been a minor price correction, which combined with a number of investors wishing to cash in on the gains, has put pressure on the market.

The returns enjoyed by dollar investors at the NSE have also this year been boosted by the strengthening of the shilling against the greenback.

Market data compiled by African Alliance shows that since the beginning of the year the dollar return on the FTSE NSE 15 index stands at 12 per cent by May 14, which is higher than the shilling return equivalent on the same index at nine per cent.

This is because the shilling has gained 2.8 per cent on the dollar since January, which boosts the amount of dollars an investor gets when converting their sales back to the US currency upon exiting a portfolio at the NSE.

The FTSE NSE 15 index, which constitutes the 15 largest firms at the stock exchange by market capitalisation, is mainly used by foreign investors looking to participate in the Kenyan market.

The fall in stocks is likely to hit pension funds hardest especially if it persists. The schemes in quarter one registered the best growth in five years thanks to share valuations.

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