Investors at the Nairobi Securities Exchange (NSE) lost Sh205 billion in paper wealth in the first three months of 2023 as the region’s largest bourse continues to weather the fallout from global and domestic economic shocks.
According to the latest data from the Capital Markets Authority (CMA) market capitalisation at the NSE stood at Sh1.7 trillion as at the end of March, falling Sh205 billion from Sh1.9 trillion recorded in January this year.
“During the quarter under review the domestic capital markets registered negative returns with the MSCI Kenya Index declining by 18.73 per cent respectively in US dollar terms compared to Q4 2022,” stated the CMA in the latest Capital Markets Soundness report. “This was on the back of a depressed equity market exacerbated by tough economic conditions domestically and globally.”
According to the CMA, Safaricom Plc, Equity Group Holdings Plc, East African Breweries Ltd, KCB Group Plc and the Cooperative Bank of Kenya Ltd continued to dominate trading at the market, accounting for an average of 71.97 per cent of the Sh44.6 billion in equity traded during the quarter.
“Domestic investors also slowed down trading as they waited on booking capital gains as most listed firms did not pay any interim dividend,” explained the CMA. “With foreign investors flight to other markets, domestic investors have been left holding onto securities with minimum trade.”
Foreign investor participation at the bourse fall from 51.7 per cent in January to 30 per cent in March. Net foreign investors sold Sh13.9 billion worth of securities in the first three months of the year, the highest rate of outflow since the onset of the Covid-19 pandemic. Kenya’s NSE further trailed behind other securities markets in Africa with investors in Nairobi booking 20 per cent on average in losses, among the highest recorded against the MSCI index.
“Noteworthy across Africa, select equity markets such as Nigeria, Tunisia and Senegal, Zimbabwe registered positive MSCI Index returns whilst others such as Kenya and Morocco posted negative returns,” said the CMA. “With foreign investors pulling out of a number of African stock markets, African equity markets remained attractive on the back individual companies’ strong fundamentals.”
In the bonds market, the government floated a total of eight treasury bonds in the first three months of this year with a target of raising 180 billion. However, the government received bids worth Sh164.1billion out of which Sh141.7 billion was accepted
This means the government fell short of the intended domestic borrowing target in the quarter under review by Sh38.3 billion, further compounding the government’s cash crisis.
“The government continues to struggle to raise the targeted amounts from the local debt market because of investors demanding higher rates amid inflation,” explained the CMA. “Investors continue to shy away from longer-dated paper preferring treasury bills on the back of growing market uncertainty related to the government’s fiscal position.”
The value of corporate bonds traded in the quarter under review stood at Sh7.5 billion, a massive 4,900 per cent spike compared to Sh150.8 billion recorded during a similar period last year.