NSE (Nairobi Securities Exchange) shed KSh 104.7 Billion in market value at the end of trading last Friday from a market capitalization of KSh 3.4 trillion to KSh 3.3 trillion as a relatively thin volume of foreign selling, concentrated in high weight counters such as Safaricom, had an impact on the market.
NSE hit as Foreigners take profits on several counters
The NASI index declined due to this selling by foreign investors, including Safaricom which has approximately 40% weight in the index. Last week, Safaricom recorded a net foreign outflow of KSh 292.8 million, representing 34.2% of total net equity outflows. Simple arithmetic tells the story. A foreign investor selling Safaricom does not just hurt Safaricom’s price. It mechanically drags down the entire index, with every percentage point decline in Safaricom translating to roughly 0.40% percentage points off the NASI.
Foreign investors were consistent net sellers throughout last week, offloading a net KSh 855.4 million in equities across all the five sessions with no single day recoding a net inflow.
According to Joshua Adriano, a financial economist, the outflow/inflow ratio settled at 1.52* meaningfully above the 1.0* neutral reading placing persistent and unrelenting downward pressure on prices from open to close of each day’s trading.
NSE Banking Stocks Decline as Foreigners Take Profits
The NSE Banking Sector stocks were not spared the damage caused by foreign investors exit. Equity Bank saw foreign investors offload KSh 115.2 million, Absa Bank Kenya lost KSh 92.2millionm BKG (KSh 70.6 million) And Coop Bank (KSh 57.2 million), collectively contributing another KSh 335milliion in net outflows, approximately 40% of the weekly total.
Combined with Safaricom, just five counters accounted for 73.4% of all net foreign selling, meaning the NASI decline was highly concentrated rather than broad based. The market did not fall uniformly. It was pulled down by foreign exit from a handful of liquid, high weight counters that foreign investors can exit quickly and at scale.
“Local investors were able to abroad 64% of turnover, providing the depth that prevented a more a disorderly price adjustment. Without this local counterbalance, the 3.14% weekly decline and the KSh 104 billion in erased market value could have been considerably more severe given the concentration of selling in Safaricom and the banking counters,” said Adriano.
NSE Foreign Investors Equity Flow
Available data from the NSE shows that there was foreign investor outflow of KSh 444.1million last Monday, followed by KSh 1,328.6 million on Tuesday, KSh 284.7 million on Wednesday, KSh 108.3 million on Thursday and KSh 345 million on Friday, bring the total equity outflow by foreign investors at KSh 2,510.8 million, against an inflow of KSh 1,655.4 million, bring in a net of KSh 855.4 million.
Safaricom recorded a foreign outflow of KSh 312.3 million, Equity KSh 326.6 million, Absa KSh 104.6 million, BKG (KSh 162.6 million), Coop Bank (KSh 58 million) and Others (KSh 1.5 billion), bringing the total foreign outflow from these highly liquid counters at KSh 2,510,767,514.
According to the NSE 2025-2029 Blueprint, foreign investors have dominated the trading activity on the NSE, particularly in liquid, high-cap stocks such as Safaricom, Equity Bank, Coop Bank and East African Breweries Ltd (EABL) and KCB among others.
However, foreign investment has been highly volatile. For example, in 2023, the NSE saw significant foreign outflows, particularly due to a weakened shilling and a flight to safety by global investors, resulting in a net foreign outflow of KSh 18.6 billion.
This trend was exacerbated by global economic uncertainties and rising yields in safer havens like the US Treasury and Equities markets.
In contrast, local retail investor participation has been minimal, which has left the market vulnerable to foreign capital flight during periods of volatility. The entry of many mobile Apps, including the latest Ziidi trader from Safaricom, has opened the market to more retail investors, boosting their participation at the Nairobi bourse.
The NSE has paid a heavy price for its overreliance on fly -by-night foreign investors. This heavy reliance on foreign investors has resulted in high volatility for the NSE, particularly during global
economic shocks.
Recent years has seen large-scale exits by foreign investors, particularly in 2022-2023, resulting in sharp declines in market indices and capitalization.
The resulting vulnerability has underscored the need for the NSE to focus on developing a stable local investor base to ensure more consistent liquidity and reduce dependency on foreign capital.
According to the NSE 2025-2029 strategy, the to target 9 million active retail investors is a response to this dynamic. By increasing local investor participation, the bourse targets to create a more stable source of market liquidity that is less affected by global economic cycles, mitigate the sharp impacts of foreign investor exits and market volatility .
ALSO READ: NSE Investors Back on Uchumi Counter as Market Slows
Leave a comment