Investor wealth at the Nairobi Securities Exchange (NSE) had dipped below the Sh4 trillion mark for the first time since crossing this milestone a month ago, weighed down by retreating blue-chip stocks driven by heightened selling by foreign and local investors.
The bourse closed Thursday with a valuation of Sh3.948 trillion, having shed Sh178.7 billion in two days to wipe out nearly a fifth of its gains in the year-to-date.
Traders said that share prices were hit by continued selling activity from investors, resulting in supply outstripping demand on most counters.
Foreign investors have sold a net of Sh2 billion worth of shares in the last three days, putting large stocks under pressure.
The biggest losers in the last two days in terms of market capitalisation are Safaricom at Sh52.1 billion, Co-operative Bank of Kenya (Sh24.9 billion), Equity Group (Sh21.7 billion), KCB Group (Sh18.5 billion) and Absa Bank Kenya (Sh16.3 billion).
“There has been some correction on large counters over the last couple of days, as investors continued taking profits and locking in substantial capital gains after the strong rally,” said Melodie Ndanu, a research analyst at Standard Investment Bank (SIB).
When sellers outnumber buyers in a session, prices usually trend downwards as those offloading units quote their stocks at the lower end of the daily price limit in the hope of securing takers for their shares ahead of competing sellers.
Alternatively, when demand exceeds supply, sellers are able to quote and get paid prices that are near the upper daily limit, setting off a rally.
The daily movement of a stock is capped at 10 percent relative to the previous day’s weighted average closing price, except on days when there is a material announcement on the counter such as an announcement of financial results.
The losses over the last two trading sessions have extended the dip that started over a week ago, when investors started selling stocks to lock in gains that had accrued during the August market rally.
The exchange’s larger stocks such as Safaricom, Equity, KCB and Co-op Bank have accounted for the bulk of the losses seen over the last week-and-a-half.
The banking stocks were trading at their all-time high levels as of September 3, when the NSE touched its highest ever valuation of Sh4.285 trillion.
Equity, KCB and Co-op Bank traded at Sh106, Sh98.55 and Sh38.55 per share respectively as of September 3, while Safaricom was trading at a multi-year high of Sh37.94 per share.
At the close of trading on Thursday, Safaricom’s share price stood at Sh35.20, while Equity’s price had fallen to Sh96 per share. KCB and Co-op Bank closed the day at Sh84.25 and Sh31.95 per share, respectively.
The sell-off on the Nairobi Securities Exchange (NSE) comes amid rising jitters among international investors over the escalation of US-Iran tensions in the Middle East.
Attacks by Yemeni Houthi rebels on the Red Sea shipping channel have also caused a jump in benchmark oil prices, triggering fears of a new round of higher global inflation.
Due to the rising geopolitical tension, the yield on the US 10-year bonds has hit the key five percent threshold for the first time since 2023. The US Federal Reserve also raised its benchmark rate by 0.25 percentage points on Wednesday, signalling concerns of higher inflation in the world’s largest economy.
The benchmark US 10-year bond rate and the Fed rate are a closely watched gauge of market inflation expectations, influencing capital movement across the globe.
For the equities markets, higher US rates tend to cause capital flight from smaller, riskier markets, especially when they are accompanied by a strengthening of the dollar in the forex market.
The capital flight ultimately weighs down share prices of stocks that are favoured by foreign investors, which in Kenya are primarily Safaricom, EABL, Equity and KCB.
