Foreign investor outflows at NSE hit Sh16.6 billion in Q4 on political instability
However, the reduction in market concentration reflects investors' growing preference for diversifying their portfolios beyond the traditional blue-chip companies.
Foreign investors increased their exits from the Nairobi Securities Exchange (NSE) in the three months to December 2024 to Sh16.6 billion, according to the latest capital markets data.
This is despite the local currency's strong performance in the period under review, which ideally would act in favour of foreign investors in terms of returns.
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The Q4 Capital Markets Soundness Report by the Capital Markets Authority (CMA) says investors increased their outflows to Sh16.64 billion in the review period from Sh628 million in the previous quarter.
Conversely, the average foreign participation in the equity market rose from 42.07 per cent to 43.83 per cent over the same period.
The report primarily attributes the capital outflow to the spillover effects of political instability experienced in the country during the second quarter, stemming from the Gen-Z-led protests.
Consequently, the market concentration of the five blue-chip companies averaged 64.24 per cent, down from 64.80 per cent in the third quarter of 2024.
A blue-chip firm refers to a nationally or internationally recognized, well-established and financially sound company that is publicly traded.
The authority however says the reduction in market concentration reflects investors' growing preference for diversifying their portfolios beyond the traditional blue-chip companies.
As of December, the top 5 companies were Safaricom Plc, Equity Group Holdings Plc, East African Breweries Ltd, KCB Group Plc, and Standard Chartered Bank Kenya Ltd.
Despite the increased investor outflow, CMA maintains a brave face on the general performance of the domestic capital markets in the period under review.
"The domestic capital markets have demonstrated remarkable resilience over the years, establishing itself as an attractive investment hub for both local and foreign investors. During the quarter, favourable macroeconomic conditions, coupled with political stability, played a pivotal role in sustaining market stability," CMA said.
"Additionally, the diversity of market participants and the availability of a broad range of capital market products have ensured consistent investment opportunities, contributing to the sustained stability and vibrancy of the market."
The four market indices NSE 20, NSE 25, NASI, and NSE 10 closed at 2,010.65, 3,402.80, 123.48, and 1,302.31 points, representing increases of 13.23, 17.37, 15.32 and 15.79 per cent, respectively, compared to the basis points recorded at the end of the third quarter of 2024.
On the other hand, the volume of shares traded during the quarter surged to Sh1.7 billion, marking a significant increase from the Sh1.02 billion shares traded in Q3 2024.
"The improved equity market performance as reflected in the significant gains across key indices and a surge in trading volumes is attributed to increased investor confidence and market activity during the quarter," CMA said.
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