Foreign investors pulled out Sh1.48 billion from the Nairobi Securities Exchange (NSE) last month.
This marks the second straight month of net-selling amid the prevailing rise in stock prices.
Data from trading and corporate advisory firm AIB-AXYS Africa shows that foreigners bought shares worth Sh6.75 billion but sold others valued at Sh8.24 billion during the review period.
The latest net selling is the largest in a single month since July last year when foreigners withdrew Sh5.34 billion on the back of Covid-19 disruptions.
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AIB-AXYS Africa Head of Research Sarah Wanga said locals were taking up the shares being sold by the foreigners, signalling that they see improved fundamentals of companies as Covid-19 abyss subsides.
“The sell-off has partly come to the benefit of locals signalling that local investors are more positive about the prospects of the market and are looking for opportunities to invest. Economic activity is picking up on relaxed Covid-19 restrictions,” said Ms Wanga.
NSE 20 index, a price weight index calculated as a mean of the top 20 best performing counters, dropped to 1,961.33 points from 2,031.17 points it opened the month with.
NSE all-share index also fell from 178.31 points to 177.96 points during the month under review.
The October performance means foreign investors have now pulled out Sh3.53 billion from the NSE since January, despite the market capitalisation surging by Sh440.37 billion in the last 10 months.
The Sh3.53 billion 10-month net selling on the NSE is however softer, compared to the same period last year when the figure stood at Sh27.09 billion as investors flew from equities to fixed income.
Net selling was seen on the top five largest stocks by market capitalisation — Safaricom, Equity, KCB, East African Breweries and Cooperative Bank of Kenya (Co-op Bank).
Other stocks that witnessed net-selling during the month included Sanlam Kenya, Centum Investment, Standard Chartered Bank, and BAT Kenya.
The heaviest net-selling came on the second week of the month when foreigners sold shares worth Sh2.03 billion, in contrast to the Sh1.23 billion shares bought.
Only the third week of the month returned a net buying position (Sh33.5 million) but wrapped up the month with Sh208.3 million net selling last week.
Focus now shifts to banks that are expected to release their third-quarter results this month, with the earnings expected to influence the direction of the bourse.
“Most banks including Standard Chartered are currently trading at a discount and this makes them attractive. The third-quarter earnings may serve as a sweetener,” said Ms Wanga.
An improved performance from lenders such as KCB, Equity, Co-op Bank, Absa Kenya and Standard Chartered Bank Kenya had helped lift the NSE to an all-time high of Sh2.921 trillion on August 17.
The lenders are expected to keep up with a rebounding performance on falling loan defaults and increased lending as coronavirus-induced economic hardships soften.
Central Bank of Kenya data showed banks’ pre-tax profit for the seven months to July hit Sh113.4 billion, overtaking the Sh112.8 billion posted in the full-year ended December last year.
The profits came on the back of non-performing loans dropping for the fifth straight month to close July at Sh433.3 billion. The defaults had hit a high of Sh444.2 billion in February.
palushula@standardmedia.co.ke
