The average daily traded turnover at the stock exchange held below the half-billion shilling level for a second straight month in November as the market looks likely to record its lowest annual turnover since 2012.
NSE and Standard Investment Bank (SIB) data shows that the average daily turnover last month stood at Sh474.4 million, with the month’s total turnover coming in at Sh10.44 billion.
It is, however, an improvement on the trading numbers for October, when the NSE’s daily average turnover fell to a four-year low of Sh392.6 million.
The total traded turnover for the first 11 months of the year stands at Sh140.7 billion. The total for 2015 was Sh209.4 billion, Sh215.7 billion in 2014, Sh155.7 billion in 2013 and Sh86.8 billion in 2012.
This year, the investment trend has seen capital flowing into the fixed-income segment as opposed to equities, with investors chasing higher returns available on government securities where interest rates are averaging between eight and 13 per cent, at a time the NSE 20 share index is 20 per cent down year to date.
“With fixed-income yields likely to be on the uptick in the coming months in view of the government’s revised uptake of domestic borrowing, the market is likely to remain subdued,” says research firm Stratlink Africa in a December 2016 markets update.
In the past two months, analysts say fund managers have reduced their activity in the equities market with foreign investors also cutting back in terms of turnover.
Foreigners have been the dominant traders in the market this year with an average monthly participation level above 65 per cent, despite holding just 25.9 per cent of the issued shares in the stock market.
The reduced activity is also likely a result of relatively stagnant share prices in recent weeks, which forces investors to keep hold of their shares since there is limited room for profit taking or entry on a bargain.
In November, the NSE 20 share index was up by 0.6 per cent (-0.4 per cent in October), while the NSE All share index shed 0.3 per cent (up 0.2 per cent in October), which is marginal compared to the year-to-date declines of 19.2 and 6.2 per cent respectively.
Central Bank of Kenya data also shows that credit uptake by Kenyans has gone down significantly in the second half of 2016, with the 12-month credit growth falling to 4.6 per cent in October, from 11.1 per cent in May.
The effect of reduced credit growth also is that investors will have lower disposable income to direct to stocks.
A positive for the market last month was the return of foreign investors to a net inflow position, bringing in Sh443 million compared to October’s net outflows of Sh129 million.
Given that investors have become more risk averse in emerging markets following the US elections, Kenya’s market might gain from the NSE’s more solid position compared to fellow African bourses.
“The Kenya equities market is also considered to be more liquid compared to other Sub-Saharan countries, thus giving Kenya a competitive advantage,” said Kingdom Securities senior analyst Mercyline Gatebi.