The Nairobi Securities Exchange (NSE) recorded a 27.5 per cent fall in paper wealth amounting to Sh547 billion in 2023 as the multi-year bear run continued to ravage investors' equities portfolio.
According to market data, the NSE closed the last trading day of the year with a valuation of Sh1.439 trillion from Sh1.986 trillion at the end of 2022.
The Nairobi All Share Index (NASI) which tracks the performance of all stocks fell by a similar margin while the NSE 20 and 25 that track the performance of the top 20 and 25 listed firms contracted by 10.4 and 24 percent respectively.
The NASI index closed at 92.11 points while the NSE 20 and NSE 25 indexes closed the year at 1,501.16 and 2,380.16 points respectively.
In comparison, wealth erosion for the Nairobi bourse stood at 23.3 percent in 2022 amounting to Sh610 billion while the performance of the NSE 20 index was largely unchanged, having fallen by 10.3 percent.
The continued bear run at the NSE in 2023 was a demonstration of the unrelenting exit of foreign investors as fixed income took centre stage as the most favoured asset class amid rising interest rates in Kenya and developed economies.
Foreign investors favoured investing in assets in their home markets as central banks in the major economies increased interest rates to rein in inflation.
“Foreigners were seen to prefer fixed income and risk asset investments in top-tier developed markets. The dynamics of demand and supply in our characteristically foreign-dominated market were imbalanced, thereby adversely affecting equity market valuations,” analysts at Genghis Capital said in a report published on October 31, 2023.
Between January and September, 6,256 foreign investors, representing 42 per cent of all foreigners, fled in the move to fixed income assets.
Net foreign portfolio outflows in 10 months to the end of October meanwhile stood at Sh19.5 billion with June and August the only months of positive foreign flows.
In the nine months to September, the NSE was ranked as the worst-performing African bourse in dollar terms in a move that highlighted the impact of foreign exits and global shocks.
The Morgan Stanley Capital International-MSCI index which tracked three Kenyan blue chips — Safaricom, Equity Group and EABL — revealed losses of 41.9 percent with Zimbabwe following at 34 percent.
Going into the New Year, the NSE is expected to see some respite from expected interest rate cuts in advanced economies which would turn the tide of foreign investor exits.
The Capital Markets Authority says the NSE is poised to rebound, supported by attractive entry points for investors, represented by low stock valuations.
