Foreign capital flee Nairobi bourse for 4th straight year

AFRICAN STOCKS AND FINANCEJanuary 3, 2024 at 9:25 PM UTC

The Nairobi Securities Exchange (NSE) ended 2023 with a fourth consecutive year of net foreign outflows. This trend has been influenced by attractive returns in other asset classes and external developed markets, as per data from the NSE.

In the 11 months leading up to November 2023, foreign investors withdrew a net amount of Sh20.04 billion (~$127 million) from the NSE, bringing the cumulative net sales since the beginning of 2020 to Sh83.3 billion. The last time the market recorded a net inflow position was in 2019, at Sh1.32 billion.

Foreign investors appear to be seeking better returns elsewhere, both within Kenya and in global markets. A significant factor contributing to these outflows has been the rate increases in the United States, the United Kingdom, and the European Union. High inflation from mid-2022 in these regions compelled central banks to tighten monetary policy, influencing the flow of money and impacting investor preferences.

Key Takeaways

The Nairobi Securities Exchange (NSE) was in November ranked as the worst-performing African stock exchange in terms of dollar returns for the first nine months of the year. This ranking highlights the significant impact of foreign exits and global shocks on East Africa's largest stock market. This assessment is based on the Morgan Stanley Capital International (MSCI) Index, a crucial source of investment information for foreign investors. Additionally, Bloomberg conducted a similar analysis, which found that the NSE was among the worst-performing stock markets globally, primarily due to the decline of the NSE All Share Index. The MSCI Index tracks three Kenyan blue-chip stocks, including Safaricom, Equity Group, and EABL, which are exposed to foreign investors who have traditionally played a substantial role in trading on these counters.

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