Foreign investment in Kenyan shares has plummeted.
Nairobi Securities Exchange's (NSE), the largest bourse in east Africa and Kenya's sole such institution, saw foreign investment drop to a six-year minimum of 30,1%, according to data released by Kenya's Capital Markets Authority. Local investors keep it afloat.
In April 2022 foreign investors cashed in $14.3 million to seek other havens.
Foreign investors withdrew $170 million last year from the Kenyan Stock Market, citing an increase in global risks. The share prices of NSE listed firms, particularly commercial banks, plummeted as a result.
Safaricom, the NSE's largest scrip based on average capitalization, has lost 36.4% in value, adding to fears of foreign investors. Equity Bank, Kenya Commercial Bank and Co-operative Bank of Kenya all saw their share prices devalue.
Foreign investors aren't really going home, but they are playing on frontier markets. Solomon Kariuki is the Africa research analyst at AIB-AXYS. He told Business Daily that there were better returns in markets like Nigeria, Zimbabwe, and Mauritius.
Kenyan investors have lost $6.37bn between January and September 2002 as the share prices of NSE listed firms plummeted 28%.
A reduction in appetite for Africa’s capital markets was caused by an increase in interest rates on developed markets such as the US. Central banks in African nations were therefore forced to increase interest rates due to the weakening of local currencies and high inflation.
Kenya was still recovering from the stock market crash when droughts, food shortages and inflation began to rise. The Russian invasion of Ukraine caused fuel prices to rise globally, which increased the cost of living.
Kenyan shillings have been a low-value currency against the US Dollar for a long time. In the last five years, the shilling lost 37% of its value compared to the dollar. It is even worse that the shilling is depreciating in value against major world currencies. There is no indication that it will recover any time soon.
Kenya is now facing a shortage of dollars. This has been the case since the covid-19 epidemic. This directly impacts the livelihoods for millions.
The dollar shortage, coupled with other economic challenges has primarily slowed down the expansion prospects of companies, increasing the threat of job loss and financial instability.