Weak performance indicators in Kenya’s economy during the first half of 2025 have eroded appetite among offshore investors on the Nairobi Securities Exchange (NSE), a development that has wiped out financial synergies generated by foreign investors seeking wider exposure across East Africa’s stock markets.

Whereas large, foreign investors interested in buying shares on the NSE often pursue additional equity opportunities available at the Ugandan, Rwandan and Tanzanian stock markets, tough operating conditions affecting Kenya’s economy have killed investment appetite towards the latter, The EastAfrican has learnt.

This trend translates into lower growth momentum in trading turnover, volumes and commission incomes earned from massive equity trades by foreign investors in neighbouring stock markets.

Kenya’s economy expanded by 4.9 percent during the first three months of 2025, backed by robust growth in the agriculture and financial services sector, despite a downturn in the tourism and manufacturing sectors. Overall economic growth fell from 5.7 percent in 2023 to 4.7 percent in 2024, under pressure from persistent street protests.

Though Kenya’s Purchasing Managers’ Index (PMI) averaged 50.9 points during the first six months of 2025, it dropped to 49.6 points in May 2025, compared with 52 points in April, a sign of deteriorating conditions in the local business environment.

The country’s domestic borrowing target rose from Ksh887.2 billion ($6.8 billion) in financial year 2024/25 to Ksh923.2 billion ($7.1 billion) in financial year 2025/26 amidst weak tax revenue collections.

Recent data compiled by Kenya’s Central Securities Depository Corporation (CSDC) shows that foreign investor participation on Safaricom Kenya’s counter accounted for 67.6 percent of its trading turnover during the first half of 2025. This translated into net foreign inflows amounting to Ksh415.7 million ($3.2 million) on the Safaricom counter.

In comparison, foreign investor participation on the East African Breweries Limited (EABL) counter accounted for 67.8 percent of its trading turnover during the first six months of 2025. This translated into net foreign inflows of Ksh86.4 million ($666,694) on the EABL counter during the period under review.

The Kenya Power and Lighting Company (KPLC) registered foreign investor participation of more than 50 percent of trading turnover generated on its counter at the NSE.

This translated into net foreign inflows of Ksh120 million ($925,964) during the second quarter of 2025. Its share price rose by 39.3 percent to Ksh11.5 ($0.08) by end of June 2025, following its recovery from an eight-year loss-making cycle.

Other major counters at the NSE that include listed banks suffered declines in foreign investor participation during the first six months of 2025 according to CSDC data.

In comparison, foreign institutional investors accounted for 43 percent of total trading turnover recorded at the Uganda Securities Exchange (USE) during the first half of 2025 compared to foreign individuals who contributed two percent of the USE’s turnover during the period under review.

Local institutional investors accounted for 28 percent of the USE’s turnover during the first six months of 2025. Overall trading turnover at the USE rose by 0.49 percent to Ush38.42 billion ($10.7 million) between January and June 2025 according to USE data.“There are serious macroeconomic challenges facing the Kenyan economy including currency depreciation risks. This means foreign investors participating in the Kenyan stock market are fairly constrained by tough economic fundamentals and this may discourage them from exploring neighbouring equity markets,” said Paul Bwiso, the bourse’s CEO.

The NSE’s main stock index rose by 40.74 percent to 153.43 points by end of June 2025 while the USE’s main stock index increased by 25.14 percent to 1,287.64 points during the same period under review.

Large foreign investors active in the region’s stock markets include pension funds, mutual funds and hedge funds managing billions of dollars in clients’ money according to industry sources.

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