Africa-Press – Kenya. Foreign investors exit from the Kenyan market in 2021 recored the fastest pace pace seen in the past three years, anew report by the Capital markets Authority shows.
They preferred to move their investments to developed economies with the exit being attributed to uncertainties around Covid-19.
The panic sales pushed down share prices particularly for banking and service sector companies whose profits suffered.
The easing of the pandemic restrictions and the improvement of the economy last year, however saw some investors make a comeback, with interest focussed on undervalued blue chip stocks.
The Capital Markets Authority Quarter Four Soundness Report released yesterday shows net foreign equity outflows grew to Sh28.6 billion last year compared to Sh10.23 billion recorded in 2020, a 179.61 per cent increase.
“The outflow had slowed down at the beginning of 2021 but the momentum was slightly interrupted in November upon the announcement of the new Omicron variant,” says the report.
It indicates that news of new variant’s outbreak resulted in a 13.66 per cent reduction in foreign investor participation in the equities market from October’s 64.83 per cent to November’s 51.16 per cent.
The net foreign outflows were highest in November, at Sh4.3 billion, accounting for 42.16 per cent of net foreign outflows in 2021.
“Even so, trading activities by recovered in December with foreign investor participation increasing to 57.20 per cent and net foreign outflows reducing to Sh2.9 billion,” the bulletin notes.
This is attributed to the resumption of dividend payments by listed firms which renewed confidence of investors, with those who took advantage of lower entry prices during the pandemic set to enjoy higher dividend yields.
The report shows that foreign investor outflows continue to pose a serious risk for the Kenyan capital markets further exasperated by the slow economic recovery witnessed in the domestic economy.
There is urgent need to up domestic investments in the capital market. This will help iron out volatilities that come with foreign investor flight,” CMA CEO Wyckliffe Shamiah said.
Shamiah urged domestic institutional and retail investors to increase their participation in the domestic capital markets and increase their stake in capital markets instruments trading in Kenya.
Foreigners however continued to donate trading at the Nairobi bourse despite the notable exits.
The report shows foreign investor participation in the country’s capital market in three months to December rose to 57.99 per cent, a 6.46 increase from the previous quarter.
The Capital markets regulator is concerned that a number of uncertainties are on the way and are likely to erode calmness currently witnessed.
It for instance cites higher inflation in developed markets, which could cause their monetary authorities to raise rates, a move that is likely to trigger a fresh flight of capital back to the west from developing markets.
The 2022 General-Elections to be held in August also poses a risk to the market’s ability to attract foreign capital flows, especially if there is continued acrimony between the main contenders ahead of the polls.
The Nairobi Securities Exchange(NSE) experienced a rise in Equity Market Turnover in the last three months of the year to Sh36.31 billion compared to Sh31.36 billion in the quarter September 2021.
However, it dropped by 7.6 per cent year -on year Year to Sh137.41 billion compared to Sh148.68 billion recorded same period in 2020.
The market capitalisation also dropped to Sh2.6 trillion during the quarter under review compared to Sh.2.8 trillion the previous quarter.
For More News And Analysis About Kenya Follow Africa-Press
