The bourse’s third quarter report, prepared by the Capital Markets Authority, shows that foreign investor participation in the market slid below the 60 per cent mark, hitting a quarterly average of 53.96, compared with 77.2 per cent average in the same quarter last year.
The uncertainty in the market was also reflected by a jump in bond market performance; turnover rose to $1.08 billion — the highest in three years — as investors shifted to the bond markets that are normally deemed less risky to invest in.
Even as Kenya gets ready to vote in a fresh presidential election this coming Thursday, the political uncertainty of the past two months has scared away investors from the Nairobi Securities Exchange; some have been disposing of huge chunks of their shares.
The bourse’s third quarter report, prepared by the Capital Markets Authority, shows that foreign investor participation in the market slid below the 60 per cent mark, hitting a quarterly average of 53.96, compared with 77.2 per cent average in the same quarter last year.
The decline in foreign investor participation is evidenced by the significant net equity outflows of $111 million recorded by the market over the period, compared with the net inflows of $60.2 million recorded in the same period a year ago.
According to CMA director of regulatory policy and strategy Luke Ombara, uncertainty surrounding the country’s election period was to blame for the outflows as foreign investors sold shares worth $342 million and bought only $231 million’s worth over the same period.
“The Ksh11.1 billion ($111 billion) foreign equity outflow registered in the third quarter, was largely a result of heightened political uncertainty in the country,” Mr Ombara said, adding the equity flows are expected to rebound soon, “as long as the current situation does not become protracted.”
Outflows rose to a high of $58 million in early September, following the Supreme Court’s annulment of the presidential election of August 8.
“The volatile political scenario has stymied just about everyone and that is evidenced in the lacklustre volumes seen at the exchange,” said Aly Khan Satchu, CEO of Rich Management.
The uncertainty in the market was also reflected by a jump in bond market performance; turnover rose to $1.08 billion — the highest in three years — as investors shifted to the bond markets that are normally deemed less risky to invest in.
According to analysts, the sustained poll uncertainty fuelled by the withdrawal of Raila Odinga — the main opposition candidate — from the election and the resignation of a commissioner of the Independent Electoral and Boundaries Commission just a week to the repeat election, means East Africa’s largest economy could continue hurting.
“The single biggest obstacle to growth has been politics. The economy has slowed down and is growing at its slowest pace in five years due to drought, a credit squeeze and the political situation,” Mr Satchu told The EastAfrican.
“Going forward, some of the factors that might contribute to a deceleration in economic growth include the ongoing political uncertainty, slowdown in credit growth to the private sector vulnerability to harsh weather, fiscal slippage and business activity disruption because of the general election and tourism disruption,” says the CMA in its report.
