D*in*ling fortunes in g****l markets hurt trading at NSE
Foreign investor turnover has shrunk to 65.7 per cent in September from 74.2 per cent recorded in June, a soundness report has shown.
This is even as foreign investors continued to dominate stock trading at the Nairobi Securities Exchange (NSE) despite accounting for only 19.9 per cent of the total equity market.
The Capital Market Soundness Report for quarter three of 2019 released last week says the reduction in participation was largely a result of a mix of macro-economic, socio-political as well as institutional challenges such as governance, uptake and financial literacy.
The report says during the three months, net foreign portfolio flow on the NSE reduced by 45.2 per cent from what it recorded in August.
Capital Markets Authority chief executive Paul Muthaura said the challenge experienced during the period was occasioned by the effects of globalisation on domestic economic performance.
“Kenya continues to witness a decline in major share indices, now spanning five years, largely as a result of a mix of macro-economic, socio-political, as well as institutional challenges such as governance, uptake and financial literacy,” said Muthaura during the report launch.
Foreign inflows
Net foreign inflow levels increased for July and August amounting to Sh262 million, compared to an outflow of Sh900 million recorded in June.
Local investors, who comprise East Africa’s institutional and individual investors accounted for 80.1 per cent of shares held in the equity market.
Muthaura urged policymakers, regulators, market participants and key stakeholders to ensure highest levels of prudence and strategy to create a favourable business environment.
He said the bond markets had equally experienced tough times as declining yields in fixed income, partially driven by increased demand for favourable returns by investors, resulted in negative yields.
Cytonn Investment assistant manager Caleb Mugendi agreed with Muthaura that activities at the bourse had been slow, with a slight decline in investors’ participation over the period.
Bond market
“The bond markets have equally experienced tough times as declining yields in fixed income, partially driven by the increased demand for favourable returns by investors, have resulted in negative yields,” the report said.
CMA regulatory policy and strategy director Luke Ombara said the report was undertaken at a time when countries were grappling with recession as capital markets performance continuing to decline the world over.
He said Kenya could protect itself from globalisation effects by redirecting focus towards monitoring and stabilising key economic indicators using fiscal and monetary policy interventions.
