Nairobi bourse foreign investors' trading shrinks in 2016

Foreign investors' trading at the Nairobi Securities Exchange (NSE) shrank this year compared to 2015 as unending bear-run erodes fortunes at the bourse.

The investors, who dominate trading at the securities market, according to new data from the NSE Friday, reduced purchases and sales by 20 percent and 23 percent respectively in the months ending October compared to a similar period last year.

While in 2015 foreign buys as at October amounted to 1.14 billion U.S. dollars and sales 1.12 billion dollars, in 2016, according to the NSE, inflows stood at 909 million dollars while outflows 862 million dollars.

The NSE figures point to a depressed trading from the foreign investors, who trade mainly large stocks in the telecommunication, banking and energy sectors.

It is certain that their trading would not surpass last year's, which stood at 1.3 billion dollars for sales and 1.31 billion dollars for purchases.

This year, the highest turnover the foreign investors have posted in a month was 145 million dollars purchases and 132 million dollars in sales, both in September. The lowest was 45 million dollars purchases, and 42 million dollars sales in February.

On the contrary, last year, purchases hit a high of 176 million dollars a month and sales 181 million dollars. The lowest, on the other hand, stood at 43 million dollars purchases and 46 million dollars sales.

The NSE has been on a prolonged bear-run that started in 2015, with the benchmark 20 share index dropping 43 percent from 5,491.3 in February last year to 3,129.7 on Thursday.

Market capitalization, which measures shareholders wealth, also dropped from 26 billion dollars in early 2015 to 18 billion dollars Thursday. Foreign investors trading Thursday stood at 53 percent from 73 percent and 84 percent in preceding days.

With reduced foreign investors' participation, the number of shares traded at the bourse this year is set to fall massively. As at October, shares traded stood at 5.1 billion, down from 5.9 billion in a similar period last year, according to the NSE.

Analysts have blamed this year's bear-run, especially on banks' stocks, to the introduction of a law capping interest rates, which led to erosion of banking stocks.

The NSE, which is also listed at the bourse, issued a profit warning in November for its full-year 2016 earnings, citing reduced equity trading volumes. Endit