Panic selling wipes out Ksh.11.2 billion NSE foreign investor wealth

Panic selling arising from the Covid-19 pandemic wiped out Ksh.11.2 billion in foreign investor wealth from the Nairobi Securities Exchange (NSE) between January and March.

New data from the Capital Markets Authority (CMA) shows foreign investor participation in the quarter culminating in net portfolio outflows in comparison to Ksh.601 million in inflows across a similar period in 2019.

The country’s capital markets remained under the cloud of the global pandemic which resulted to a significant hit in the equities counter.

“The quarter under review was overshadowed by global socio economic shocks triggered by the COVID-19 pandemic. Kenya was no exception to the ensuing financial contagion, with the first announcement of COVID-19 cases resulting in the NSE 20-share index shedding over 5%, prompting a market halt, sparked-off by panic selling in an already bearish market,” noted CMA Director of Regulatory Policy and Strategy Luke Ombara.

The NSE’s major indices hit bear territory through March as both the Nairobi All Share Index (NASI) and the NSE 20 lost 20.7 and 23.9 percent of their values to close as 131.92 points and 1966.12 points respectively.

Market Capitalization in the period contracted by 7.9 percent to 2.016 trillion from a higher 2.2 trillion cap as the equities market turnover declined by 2.9 percent.

The recorded portfolio outflows by foreign investors was mirrored in the top 10 listed firms who saw their market capitalization fall to Ksh.2 trillion from Ksh.2.5 trillion.

Safaricom’s market capitalization for instance declined by 8.3 percent to Ksh.1.1 trillion at the end of March from Ksh.1.2 trillion at the end of January.

The NSE equities market was held from plunging further by local investor participation who took up positions following the exit of the foreigners.

“It is impressive to see local investors exude confidence in the market and take up more positions. The increased local investor participation and continued trading inflows from the international markets is evidence of the attractive valuation of stocks trading on the exchange,” NSE Chief Executive Officer Geoffrey Odundo said on March 16.

The NSE secondary bond market was meanwhile a mirror opposite of the equities slide as investors favoured buying into risk-free government debt to safe guard amidst volatility.

Bond turnover in the quarter rose by 48.3 percent in the quarter to Ksh.157.3 billion from a lesser Ksh.106.5 billion in the previous quarter.

The switch to government debt was also mirrored in the bonds primary market with investors submitting bids of Ksh.147.6 billion against offers of Ksh.150 billion to represent a 98.4 percent subscription rate.

The decline in NSE equities corresponds to declines in emerging markets and frontier market indices which also shed 23.9 percent and 27.1 percent of values respectively.