Offshore investors bought a net Sh419.5 million worth of shares on the Nairobi Securities Exchange (NSE) in June, extending the trend to a third straight month.
NSE data shows that foreign net portfolio flows to the bourse in June were, however, lower than May’s Sh1.49 billion—a pointer to some waned appetite among the investors.
The net purchases trend by the offshore investors nonetheless stood for a third month since April when they took up Sh1billion worth of stocks --signifying the return of the external investors to the bourse.
Foreigners remained buyers of locally listed stocks in June, representing the third straight month of purchases by offshore investors which affirms confidence in the domestic market.
The consecutive foreign inflows to the NSE mark the extended confidence in the market by foreigners who were previously sellers, with the exits being driven by concerns about foreign exchange availability and better returns from higher interest rates in advanced economies.
The raising of interest rates by the Central Bank of Kenya (CBK) has improved the attraction of the local market to foreigners, while the improvements in the exchange rate have provided liquidity for offshore investors, allowing them to enter and exit the market at will.
A stronger Kenyan shilling has moreover sweetened the deal for the foreigners with dollar returns from the NSE peaking at 63.44 percent as of the end of May allowing investors cashing out to get more dollars for the same value of stocks sold in local currency after the rally.
The dollar returns from Kenya on a year-to-date basis have outperformed the average return of 5.95 percent from frontier markets according to the Morgan Stanley Capital International (MSCI) index.
Foreigners portfolio flows into the NSE, so far in 2024, currently stand at Sh644.7 million factoring in selloffs seen in the first three months of the year before the shifting of the tide.
The local bourse has also benefited from the favourable reviews including the end of restrictions on the availability of foreign exchange by the MSCI and the FTSE Russell indexes.
Kenya had been placed under the watch of the two investor service providers in 2022, following reports of foreign investors facing difficulties in accessing dollars from the local forex market to repatriate dividends and proceeds of share sales.
The red herring dented investor confidence by discouraging flows while forcing holders to hold off from selling in dollar-starved markets.
The NSE had expected the reclassification of the bourse to boost inflows from the foreigners.
NSE’s attraction to offshore investors has gotten a further lift from the inclusion of KCB Group to the MSCI frontier market index which has increased the counter’s visibility to foreigners.
KCB has joined Safaricom, Equity Group, and East African Breweries Plc who are already constituents of the frontier market index which captures large and mid-cap stocks across 28 markets.
Foreign investors are an integral part of the NSE bourse based on their active participation in trading activity.
Average foreign participation as a share of equity turnover has recovered from a low 30.1 percent in March 2023 to 62.84 percent in March this year according to additional data from the NSE.
The foreign input has been key in supporting the year-to-date rise in the NSE which closed June with a mean return of 18.8 percent as investor wealth rose by Sh271 billion to top Sh1.71 trillion from Sh1.43 trillion at the end of last year.
