Stock sales by foreign investors fall in January

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Capital markets

Stock sales by foreign investors fall in January


Nairobi Securities Exchange (NSE) on the floor of the Exchange building in Nairobi on August 26, 2020. PHOTO | NJAU SALATON | NMG

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Summary

  • NSE data shows investors made net sales worth 423 million shillings last month, down from the 2.87 billion shillings they sold in December 2021.
  • The last quarter of 2021 saw an acceleration in selling by investors, bringing total net outflows for the year to 10.24 billion shillings.
  • Analysts at investment bank AIB-AXYS expect demand for equities to remain strong this month, especially in sectors that promise good dividends.

Foreign investors on the Nairobi Stock Exchange (NSE) #ticker:NSE slowed their selling activity in January compared to the previous four months which had been characterized by profit taking on blue chip stocks.

NSE data shows investors made net sales worth 423 million shillings last month, down from the 2.87 billion shillings they sold in December 2021.

The last quarter of 2021 saw an acceleration in selling by investors, bringing total net outflows for the year to 10.24 billion shillings.

Investors are snapping up the shares now, however, in anticipation of better dividend payouts tied to fiscal 2021, especially among banks expected to report record profits.

The waning threat from the Omicron strain of Covid-19 has also eased fears about the state of the economy and corporate performance in the current year, improving sentiment towards NSE stocks.

Analysts at investment bank AIB-AXYS expect demand for equities to remain strong this month, especially in sectors that promise good dividends.

“We expect investors to continue to take positions in the banking sector in anticipation of strong results for fiscal 2021 which should see a return to dividend payments,” AIB-AXYS said.

Foreign investors primarily trade the largest, blue chip stocks, which have the liquidity to support their large trades and strong fundamentals that provide price stability.

Safaricom #ticker:SCOM , EABL #ticker:EABL , Equity Group #ticker:EQTY and KCB Group #ticker:KCB thus dominate the foreign markets table.

In January, the four stocks accounted for 93.1% of the total turnover of 8.2 billion shillings traded by the NSE, underlining their market dominance. They also represent 77% of the market capitalization of the NSE, which stands at 2.63 trillion shillings.

Foreign flows to emerging and frontier markets will, however, face headwinds in the second quarter of the year if the US Federal Reserve moves forward with plans to withdraw or reduce its stimulus program in the event of a pandemic, which would increase US rates.

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