Foreign investors turn net sellers in October as NSE struggles for lift


Foreign investors turn net sellers in October as NSE struggles for lift
A display of listed equities at the NSE. PHOTO | CITIZEN DIGITAL

In Summary

  • According to market data covering October, the foreign investors sold shares amounting to Ksh.1.1 billion against a buying position of Ksh.805 million.
  • The NSE 20 and NSE 25 indexes remain in bear territory with a year to date (YTD) performance recording losses of 22.7 and 32.8 per cent respectively. The Nairobi all share index (NASI) has meanwhile recorded a YTD loss of 15.8 per cent.
  • Nevertheless, the market continues to trade at attractive entry points and at multiples below historical averages. The current price to earnings ratio valuation of 9.6 times is for instance 26.2 per cent below the 11-year historical average of 13 times.

Foreign investors in the Nairobi Securities Exchange (NSE) turned net sellers in October ending a two-month cooldown which saw the investors buy into locally listed stocks.

According to market data covering October, the foreign investors sold shares amounting to Ksh.1.1 billion against a buying position of Ksh.805 million.

Save for the months of August, September and January, foreign investors have remained net sellers dumping stocks amounting to Ksh.29 billion in the year to far.

The sell-offs which kicked in following the reporting of Kenya’s first COVID-19 case has dwindled market performance as all three primary indicators remain lethargic.

For instance the NSE 20 and NSE 25 indexes remain in bear territory with a year to date (YTD) performance recording losses of 22.7 and 32.8 per cent respectively.

The Nairobi all share index (NASI) has meanwhile recorded a YTD loss of 15.8 per cent.

The lacklustre market performance has coincided with declines in large-cap stocks such as EABL, KCB and BAT whose share prices have declined by 4.3, 2.7 and 2.1 per cent respectively.

According to Cytonn Investment Research Analyst David Ngugi, uncertainities related to the COVID-19 pandemic alongside a worsening macro-economic environment has seen foreign investor stay off the domestic market.

“We continue to see a retention of tough economic conditions. We have for instance seen depressed GDP numbers while we see anxiety over a second wave of COVID-19 infections are related restrictions,” he said.

Nevertheless, the market continues to trade at attractive entry points and at multiples below historical averages.

The current price to earnings ratio valuation of 9.6 times is for instance 26.2 per cent below the 11-year historical average of 13 times.

“With the market trading at valuations below the historical average, we believe there are pockets of value in the market for investors with higher risk tolerance and are willing to wait out the pandemic,” Cytonn Investment analysts said in a monthly note published on Sunday.

The depressed market performance mirrors a similar trend in emerging and developing economies as foreign investors continue to favour safe-haven investments.

In Kenya, foreign investors have a 70 per cent hold of daily trading at the NSE.

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