The participation of foreigners in the Nairobi Securities Exchange (NSE) fell to 38.24 percent in the three months to March 2025 as jitters over anticipated US tariffs weighed on investor sentiment.
President Donald Trump announced reciprocal tariffs on most countries on April 5, but the announcement had been pre-empted by markets weeks earlier.
Foreign participation fell from a higher 43.83 percent in the quarter ended December 2024.
According to the Capital Markets Authority (CMA), foreign participation had remained largely unchanged at 46.22 percent in January before falling off a cliff to 31.03 percent in March as the fallout from the US tariff announcement spread to emerging and frontier markets.
“Foreign investors continued to scale down their participation in the equity market, with foreign activity accounting for 38.24 percent of total market turnover in Q1 2025, down from 43.83 percent in Q4 2024,” said Luke Ombara, the director of policy and market development at the CMA.
“The drop is attributed to investors seeking a secure investment environment that is unlikely to be significantly affected by the proposed policy reforms in the US. These tariffs may have triggered concerns over potential trade wars, leading investors to seek safer havens away from the frontier and emerging markets, which are likely to be the most affected by these tariffs.”
Foreigners also remained net sellers during the period, recording equity outflows of Sh3.2 billion in the quarter in line with the market jitters.
Market indices
The performance of the equity market has, nevertheless, remained upbeat despite the foreigners exits, with all four market indices rising in the first quarter of 2025.
The NSE20, NSE25, NASI and NSE 10 closed at 2,226.88 points, 3,532.38 points, 130.81 points and 1,342.38 points respectively, up from 2,010.65, 3,402.80, 123.48 and 1,302.31 basis points recorded as at December 31, 2024.
However, the total volume of shares traded declined to 1.57 billion shares from 1.67 billion shares a year ago.
NSE dollar returns for the three months remained solid with the MSCI Kenya Index posting a gain of 3.69 percent in the quarter, albeit a considerable decrease from 76.62 percent recorded last year from the rallying of the Kenya shilling.
The CMA has attributed the improved performance of the bourse to the continued resilience of the NSE, which has enabled it to withstand the exogenous shocks.
“Over the years, Kenya’s capital markets have remained among the best-performing and most resilient in the sub-Saharan region. This strong performance is driven by several factors, including a well-diversified market,” the markets regulator said.
During the quarter, two more NSE-listed firms joined the Morgan Stanley Capital International (MSCI) frontier market indices --Standard Chartered Bank Kenya and HF Group.
StanChart joined the frontier market index that also includes Co-operative Bank of Kenya, Safaricom, Equity Group, East African Breweries Limited (EABL) and KCB Group.
HF Group joined the small cap index that also has BAT Kenya, KenGen, Kenya Re and DTB Group.
The inclusion of more NSE-listed firms into world indices is expected to increase the visibility of Kenyan companies to foreigners even as the offshore investors look out of policy certainty before dipping their feet back into emerging and frontier markets.
