Foreigners reap big at NSE as dollar returns hit 30pc

Thursday December 14 2017

An investor at the NSE. FILE PHOTO | SALATON NJAU | NMG

An investor at the NSE. FILE PHOTO | SALATON NJAU | NMG 

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Foreign investors have continued reaping good returns at the Nairobi Securities Exchange (NSE) in the last quarter of the year as dollar-adjusted returns rose to 30 per cent at end of November.

Market data compiled by African Alliance shows that the 11-month returns outperformed peer bourses of Nigeria (24 per cent), Morocco (16 per cent), Egypt (22 per cent) and Tunisia (4.6 per cent).

The much larger South Africa Johannesburg Stock Exchange also trails the NSE in dollar returns at 17 per cent.

The returns have been boosted by a stable shilling, coupled with rising share prices among the bigger stocks that constitute the NSE FTSE indices, which external investors use to guide their investments.

“The FTSE NSE Kenya 15 gained 0.7 per cent to close the week at 211 points on the back of gains in Kenya Airways, Scan Group and TPS East Africa…the index is up 30.6 per cent year-to-date, or up 29.9 per cent in dollar terms,” said African Alliance in its latest African markets weekly report.

Foreign investors, upon conversion of sales proceeds to hard currency when exiting a stock can either make a currency gain or loss depending on whether the shilling has strengthened or weakened to the dollar.

The high return, however, encourages profit taking among investors. Foreigners were the most active buyers in the market during the bear that ran from March 2015 until earlier this year, and have been selling off stocks as prices recover.

Data from Standard Investment Bank shows they are set to end the year with a net outflow position, having taken out $115 million (Sh11.8 billion) in the 11 months to the end of November.

In the last three weeks however, they have been net buyers, indicating that the run of profit taking could be coming to an end.

The end of the political uncertainty that has held the market hostage since August is also likely to encourage those looking to take a long-term position on the market to come in.