Foreign investor outflows from the Nairobi Securities Exchange (NSE) surged to Sh16.6 billion in the fourth quarter of 2024, marking a dramatic rise compared to the Sh628 million recorded in the previous quarter, according to the latest Capital Markets Soundness Report by the Capital Markets Authority (CMA).
This significant increase occurred despite the Kenyan shilling’s robust performance during the period, a factor that typically enhances returns for foreign investors. However, the spillover effects of political instability earlier in the year, particularly the Gen-Z-led protests in Q2, played a critical role in driving the capital flight.
Foreign Participation and Market Trends
Interestingly, foreign participation in the NSE equity market saw a slight uptick, rising from an average of 42.07% in Q3 to 43.83% in Q4. This indicates sustained interest from international investors despite heightened outflows.
The report also highlighted a shift in investment strategies, with a reduction in the dominance of the top five blue-chip companies—Safaricom Plc, Equity Group Holdings Plc, East African Breweries Ltd, KCB Group Plc, and Standard Chartered Bank Kenya Ltd. These firms accounted for 64.24% of market activity in Q4, down from 64.80% in the previous quarter. The CMA attributes this to growing investor preference for portfolio diversification beyond traditional blue-chip stocks.
Market Resilience Amid Challenges
Despite the challenges, the NSE demonstrated strong resilience. Key market indices showed impressive gains:
- NSE 20: Closed at 2,010.65 points, up 13.23% from Q3 2024.
- NSE 25: Ended at 3,402.80 points, rising 17.37%.
- NASI: Climbed to 123.48 points, an increase of 15.32%.
- NSE 10: Concluded at 1,302.31 points, up 15.79%.
Additionally, trading volumes soared, with 1.7 billion shares traded in Q4, a substantial rise from 1.02 billion shares in the previous quarter. The CMA attributed this to increased investor confidence and heightened market activity.
CMA’s Outlook on Market Performance
In its assessment, the CMA remained optimistic about the domestic capital markets’ future. “The domestic capital markets have demonstrated remarkable resilience over the years, establishing themselves as an attractive investment hub for both local and foreign investors. During the quarter, favorable macroeconomic conditions, coupled with political stability, played a pivotal role in sustaining market stability,” the CMA stated.
The authority also emphasized the role of a diverse range of market participants and innovative capital market products in ensuring consistent investment opportunities, thereby fostering market stability and vibrancy.
Looking Ahead
While Q4 2024 posed challenges, the Nairobi Securities Exchange continued to showcase its ability to navigate turbulence and maintain investor interest. As the region’s financial markets evolve, diversification and resilience are likely to remain key themes driving future growth and stability.
