Locals return to bourse but foreigners dominant

Local investors increased market participation at the Nairobi Securities Exchange (NSE) in the second half of the year, as rising share prices attracted retail buyers back to trading in a market still dominated by foreigners.

NSE data compiled by Standard Investment Bank (SIB) shows between January and June, monthly local investor participation (measured as a percentage of contribution to traded turnover) stood at just 27 percent.

Foreign investors in the meantime were accounting for nearly three quarters of all traded turnover, at 73 percent on average.

Between July and November, locals raised participation by 10 percentage points to a monthly average of 37 percent — pushing the foreign share down to 63 percent.

In November, local investors accounted for 44.2 percent of the total traded turnover, the highest monthly share since May 2018. The NSE’s total traded turnover in the 11 months to November stood at Sh139.6 billion.

Local investors, who are classified as Kenyan and East African retail and institutional investors, hold 79.09 percent of the 95 million issued shares at the NSE while foreign investors hold 20.91 percent.

Some local retail investors come into the market largely for capital gains, hence are attracted to buy when prices look to be rising in the hope of booking gains.

The return to the trading floor of locals has thus coincided with a return to positive territory of the market, which in the third and fourth quarters was able to recover the losses in investor wealth seen in the first half of the year.

In the year-to-date, NSE’s market capitalisation has gone up by Sh408 billion to hit Sh2.5 trillion, effectively reversing the loss by a similar margin that investors endured in a bruising 2018 where many firms recorded double-digit percentage falls in share price.