NSE Starts 2023 Sluggishly with Sh10B Capital Depreciation

Nairobi Securities Exchange (NSE) shed about Sh10 billion in the first week of trading in 2023, continuing the woes of massive net selling by foreign investors that gripped the bourse for months in the previous year.

As of last week Friday January 6, NSE’s market capitalisation closed at Sh1.976 trillion compared to the Sh1.986 trillion value it had in the last week of December 2022, representing a 0.49 percent depreciation.

This happened despite the volume of equity traded, which has significant proportions of participation by foreign investors, increasing by 4.49 percent during the week to close at Sh31.43 million. 

The depreciation of the NSE is on the back of heightened global risks that have seen foreigners shift to safer markets, especially to the US, which now guarantees better returns as the federal government hikes the interest rates. 

“There was a net outflow of Sh292.88 million during the week, from last week’s outflow of  Sh359.77 million,” NSE said in its year-opening weekly market performance. Sales by foreigners were mainly high on Wednesday last week.

Equity turnover had decreased by 8.98 percent to Sh769.67 million by last Friday. During the week, the total market turnover of the top five companies, which mainly drives the activities at the NSE, was Sh707.06 million, accounting for 91.86 percent of the total turnover.

The top five companies by market turnover were Equity Bank, Absa Bank, Safaricom, EABL and NCBA Bank.

The top five total turnover as a proportion of total market turnover increased by 3.25 percent from 95.11 percent recorded in the previous week.

A reduced appetite for emerging markets has recently weighed down the performance of African stock markets after a jump in interest rates in developed markets such as the US, where high inflation forced their central banks to adjust rates upwards.

For instance, Safaricom, which represents the largest stock at the NSE by average market capitalisation, has depreciated by about 38 percent of its value to close 2022 with a share price of Sh23.5 over the last 12 months.

Others, such as Equity, KCB and Co-operative banks, have witnessed a similar trend with the value of stocks.

“Foreign investors were largely out of the market on the day. They accounted for 34.13% of the total market turnover,” says investment solutions provider Genghis Capital in a review of the weekly trading.