The Nairobi Securities Exchange (NSE) handed foreign investors the third highest dollar returns in the year so far among the 10 African markets tracked by the Morgan Stanley Capital International (MSCI) frontier and emerging market indices, following the recent blue chip stocks price rally.
Analysis of the year-to-date returns for the African markets on the MSCI indices shows that Kenya's return of 38.4 percent only trails Morocco and Nigeria's gains of 50.2 percent and 39.3 percent respectively.
Morocco's returns have been boosted by its currency gaining 8.4 percent versus the dollar this year, which raises the exchange gains enjoyed by foreigners when converting their sales into the US currency for repatriation.
For the Nigeria market, a 16.6 percent jump in valuation in July boosted its overall returns for this year, with the naira also gaining 2.2 percent on the dollar to back the share prices.
Over the last two months, the NSE has seen an acceleration in share prices that has lifted the market to a valuation of Sh2.79 trillion, representing an increase of Sh368.7 billion since the end of June -- and by Sh846 billion since the beginning of the year.
All of the actively trading stocks included on the Kenya MSCI listing -- Bamburi remains suspended from trading -- have reported double digit growth of between 20.8 percent and 96 percent over the last three months, helping the NSE rise to third spot on the Africa indices, from fifth at the end of June.
Top gainers include KenGen (96 percent), Kenya Re (70.4 percent), HF Group (58.5 percent), Co-operative Bank of Kenya (43 percent) and Safaricom (42.3 percent).
Safaricom, Equity Group, EABL, KCB Group, Co-op Bank and Standard Chartered Bank Kenya are listed on the MSCI frontier markets index, while BAT Kenya, KenGen, Kenya Re, Kenya Power, DTB Group, Carbacid, Bamburi Cement and HF Group are on the MSCI frontier markets small cap index.
Read: NSE gains Sh1trn amid shares rally, bonds decline
Courtesy of the inclusion on the MSCI indices and fellow global index provider Financial Times Stock Exchange (FTSE) Russell Index, these stocks enjoy higher visibility among deep-pocketed foreign investors, boosting their turnover and price gains when market conditions turn bullish.
Given the attractive returns on offer in the NSE and the reduced risk of forex losses due to the prolonged stability of the shilling, foreign investors made net purchases of Sh1.6 billion in August.
This was the highest monthly net inflows in four years, and only the second time they have made net purchases this year -- after June's Sh820 million net inflows.
However, some of the foreign investors opted to book profits on their investments following the recent price rally, resulting in net outflows of Sh1.17 billion that were largely on the Safaricom stock which touched a three year high of Sh30 per share last Thursday.
Since 2019, foreigners have largely remained bearish on smaller markets, largely due to a flight to the safety of developed markets amid global shocks such as the Covid-19 pandemic and the Russia-Ukraine war.
Last year, they sold a net of Sh16.5 billion, although this was inflated by the block trade sale of Bamburi shares by Swiss multinational Holcim to a Kenyan registered subsidiary of Tanzanian conglomerate Amsons Group.
The last full year of inflows at the NSE was 2019, when the foreigners bought a net of Sh1.38 billion worth of shares.