Economic woes force Nairobi Securities Exchange to wipe off $6bln

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Investors on the Nairobi Securities Exchange (NSE) lost Ksh777.83 billion ($6.37 billion) of wealth in nine months as the value of listed firms plunged by 28 percent between January and September amid a persistent bear run on the struggling bourse.

Central Bank’s monthly economic data shows that the bourse’s market capitalisation fell to Ksh2 trillion ($16.39 billion) from Ksh2.77 trillion ($22.7 billion) during the period under review, with the situation compounded by massive exits by foreign investors.

According to CBK’s Monthly Economic Indicators Report (September) foreign investors’ participation on the bourse fell to 35.92 percent from 49.92 percent.

The NSE is bearing the brunt of rising inflation, growing interest rates, depreciating shilling, general investor apathy, lack of new listings, poor performance of listed firms and the massive selloffs by international investors.

Foreigners are liquidating their investments in emerging and frontier markets as a result of rising interest rates in the US and Europe, and the geopolitical tensions brought about by the on-going war between Russia and UkraineKenya is facing difficulties attracting foreign inflows after foreign investors dumped shares worth Ksh19.54 billion ($160.16 million) in nine months to September amid concerns by the New York-based Morgan Stanley Capital International (MSCI) on the country’s deteriorating investment environment. Mid this year, MSCI put Kenya on a watchlist of troubled markets unfit for foreign investments alongside Nigeria, Mauritius, Egypt, Sri Lanka, Brazil, and Qatar.

Repatriation restrictions

In its latest market review report published in June, MSCI highlighted difficult investment conditions that have hampered foreign investments in Kenya. These include biting dollar shortage that has made it difficult for foreigners to carry out their trading operations, compounded by depreciating shilling leading to a rise in forex deposits.

According to the report, MSCI also raised concerns regarding how the Kenya government imposed foreign capital repatriation restrictions by demanding certificate of foreign currency inflow before allowing foreign investors to send home their investment earnings.

In June, the NSE 20-Share Index — the benchmark index — fell below 1,700 for the first time in 20 years, indicating muted activity and free fall of prices on the 68-year-old stockmarket.

In 2015, Kenya abolished a 75 percent restriction on foreign shareholding in listed companies allowing 100 percent ownership of a listed firm. The amendment on the Capital Markets (Foreign Investors) Regulations allowed the Treasury Cabinet Secretary to prescribe the maximum foreign holding in an issuer or listed company considered of “strategic interest”.