The foreign investors equity outflows in the capital markets dropped by Sh12.4 billion in the second quarter of the year as the bourse slowly recovered from the impacts high interest rates and global shocks.
In the three months to June 2023 foreign investors pulled out Sh1.5 billion compared to the Sh13.93 billion net outflow that was recorded in the first quarter.
The drop in outflows came despite the market volatility increasing in comparison to the last quarter but remained relatively low below one percent.
Capital Markets Authority Director, Policy & Market Development, Luke Ombara told the star that There is still some level of risks from foreign investors flights its considered low.
“We have 44 percent contribution of foreign investors in the capital markets this is from the highs of 60s and 70s, there is a growing optimism that domestic investors are taking up a role in the Markets,” said Ombara.
Notably, June marked the first instance since February 2022 where the market observed a net capital inflow (Sh113 million).
Foreign investors have been taking a cautious approach given the debt distress issues facing a number African markets including Kenya that has dampened interest in African equities markets.
He was speaking during the release of CMA Soundness Report for the second quarter.
According to the findings in the review period timely repatriation of income still remains a challenge in the face of timely access to foreign exchange together with other structural market challenges.
“We are trying to bring liquidity enhancement measures and pushing for those we have already introduced it’s just that they have not yet gained trained traction. Some of the initiatives include day trading, securities lending and borrowing,” added Ombara.
To address the liquidity challenges the Capital Markets Regulator says they will engage with key market stakeholders on measures to spur greater domestic and foreign investor investors participation.
Among the proposlas CMA is considering is the The issuance of Project bonds, Green Bonds and Islamic bonds that can serve as alternative financing vehicles for specific government projects.
CMA says it is also working with development partners on an SPV (Securitization) Framework for County Issuance of bonds.
“CMA will work with Kenyan stakeholders towards picking key lessons from other African countries on their journey so far to ensure that Kenya has a competitive institutional and facilitative regulatory regime to position Kenya as Africa’s premier commodities trading hub,” the report reads in part.
The authorities Chief Executive Wycliffe Shamiah said that going into the second half of the year We expect a lot of activities in the secondary bond markets with the introduction of CBK’s new infrastructure DhowCSD that will be operational from July 31.
Investors continue to focus on select few companies which include Safaricom, Equity Group Holdings, East African Breweries, KCB Group and the Co-operative Bank of Kenya which control 67.8 percent of the market.
The market share is a drop from the 71.97 percent that the firms controlled in the first quarter of the year.
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