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NSE investors lost Sh200b in paper wealth last year

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Investors in the equity market lost Sh200 billion in net-worth last year as market capitalisation dropped to Sh2.34 trillion from Sh2.54 trillion in 2019, says the Capital Markets Authority (CMA) in it’s fourth quarter report for 2020.

The period which coincided with the second wave of the Covid-19 pandemic saw foreign investors exit the market eyeing greener pastures and less risky opportunities. 

CMA says as at December 31, 2020, total foreign outflows totalled Sh28.6 billion, against net inflows of Sh1.38 billion recorded the previous year. The regulator calls this resilience.

Bounced back

“The Sh2.34 trillion is a Sh320 billion gain from the drop of Sh2.02 trillion recorded at the onset of Covid-19 in March 2020, which was also the lowest monthly market capitalisation, as well as a 209 billion rise compared to the Q3 of 2020,” the report says.

According to CMA’s director for Regulatory Policy and Strategy Luke Ombara, the dip was partly informed by investors shifting from listed equity to other investments, to mitigate against the declining value of their portfolios.

Churchill Ogutu, head of research at Genghis Capital Ltd said except for Safaricom which bounced back from a low of Sh23 a share, flattening to a highest historical level of Sh34, the rest of stock performance, especially those in the banking sector dropped significantly, which explained why foreign investors were exiting.

He said increased diaspora remittances which by December touched a historical Sh340 billion ($3 billion) was a positive development that would increase the stock of foreign currency reserves required to service import payments and mitigate against pressure on the Kenyan shilling.

According to the report, total bond turnover during the period increased by 6 per cent to Sh691.8 billion, from the Sh651.7 billion recorded in 2019. 

The alternative asset classes listed at the NSE including Real Estate Investment Trusts and Exchange Traded Funds recorded a substantial rise in activity. 

A notable silver lining was a steady increase in total assets under management by Collective Investment Schemes to Sh98 billion as at September 2020 compared to Sh88 billion recorded by June 2020, with final fourth quarter figures expected to surpass the Sh100 billion mark.

Commercial banks

Kenya’s Capital Markets Authority (CMA) has proposed a comprehensive review of rules governing the operations of Collective Investment Schemes (CISs) to check dominance of commercial banks.

This even as CMA moved to review of the Collective Investment Schemes Regulations, 2001, seeking to introduce a harmonised criteria of valuing assets held. 

The review will ensure transparency in the management of investments and reporting of the schemes’ performances to the regulator.

In summary

    • The Sh2.34 trillion is a Sh320 billion gain from the drop of Sh2.02 trillion recorded at the onset of Covid-19 in March 2020, which was  the lowest monthly market capitalisation.
    • Except for Safaricom which bounced back from a low of Sh23 a share, the rest of stock performance, especially those in the banking sector dropped significantly.
    • Kenya’s Capital Markets Authority (CMA) has proposed a comprehensive review of rules governing the operations of Collective Investment Schemes.
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