Investors in Kenya’s stockmarket counted paper losses after Ksh203 billion ($1.86 billion) of their wealth was wiped out on the Nairobi Securities Exchange (NSE) last year largely as a result of weak corporate governance and the Covid-19 pandemic that hurt corporate earnings and dimmed dividend prospects and foreign investments.
Latest data by the Capital Markets Authority shows that the total value of listed firms — market capitalisation — declined from Ksh2.53 trillion ($23.21 billion) in 2019 to Ksh2.33 trillion ($21.37 billion) in 2020 as most foreign investors sold more shares than they purchased, resulting into a net outflow from the bourse valued at Ksh28.63 billion ($262.66 million).
Equity turnover fell from Ksh45.01 billion ($412.93 million) to Ksh27.51 billion ($252.38 million). The subdued equities market performance could be explained by the pandemic which weakened firms, leading to overall net outflows by foreign investors seeking to cut losses.
Low participation by foreign investors, saw average foreign investor participation to total equity turnover decline from 68.6 percent in December 2019 to 60.6 percent by the end of July 2020.
During 2020 most counters recorded losses, save for the telecommunication and agricultural sectors, with the Gold Exchange Traded Fund recording the highest gains at 33.9 percent as investors shielded themselves from stock volatility.
Investors in Real Estate Investment Trust, Fahari I-REIT, were the biggest losers, with their investments dropping by 40.1 percent. Last year, investors in listed banks lost 29.1 percent while those who put money in the Construction and Allied Sector shed 32.2 percent of their investment.
Manufacturing, Insurance and Energy and Petroleum Sectors lost 8.3 percent, 22.1 percent and 20.4 percent of their values respectively
The value of companies in the Investments and the Automobiles and Accessories sectors fell by 26.7 percent and 15.4 percent respectively while those in Commercial and Services Sector gained by 25.6 per cent. Agriculture and Telecommunication sectors gained 2.9 percent and 8.7 percent respectively.
Analysts at global investment banking firm EFG Hermes said prospects of the market’s recovery in 2021-22 hangs in the balance following the charged political environment ahead of the 2022 elections with local investors opting to putting their money in relatively stable fixed income securities.
“The political picture explains the greater investor risk-aversion. In 2017, President Uhuru Kenyatta was up for re-election with the same coalition that won the 2012 elections. In the upcoming election, due August 2022, there is uncertainty about who the front-runners will be and what constitutional powers the new president will command,” the analysts said in their market report last week.
“NSE is already reflecting uncertainty about Kenya’s political path than it did two years before the 2017 elections.”