Foreigner investors continue to be net sellers at the Nairobi Securities Exchange (NSE) as the coronavirus pandemic spreads panic in global equity markets.
At the close of trading on Thursday, the NSE 20 share index, declined by 0.17% to close at 1,759.28 while Equity turnover declined by 69.15% to KSh 208.6 Million compared to Wednesday’s turnover of KSh 676.2 Million. Foreign investors assumed a net buying position by accounting for 47.09% of total market sales and 56.08% of total market purchases.
The NSE 20 Share Index, which tracks the top 20 best performing counters on the exchange is currently trading at a 17 year low having lost by more than 31% on a year to date basis according to data from The Financial Times.
Dealers and investment bankers who spoke to this publication indicated increased activity at the bourse by foreign investors, who are exiting the market in a panic.
“Foreign investors have been net sellers at the NSE for a couple of days now as they seek for safer havens, to hedge against uncertainties brought about by global coronavirus pandemic,” said Felix Ochieng, a dealer at Faida Investment Bank.
A flight by foreign investors, who dominate trading activities at the NSE, has continued to push up prices of the NewGold Exchange Traded Funds (ETF).
On Wednesday this week, the NewGold ETF moved 5,000 units valued at KSh10 Million and closed at a new high of KSh2,040.00. On Thursday, the counter moved 5,000 units valued at KSh8Million and closed at KSh2,040.00
“The price of the ETF at the Nairobi Stock Exchange moves in tandem with the global price of gold,” said Gerald Muriuki, a research analyst at Nairobi based brokerage Genghis Capital Limited.
On a global scale, the price of Gold this week hit past $ 2,000 an ounce, for the first time. This is as investors hedge against COVID-19 and a weakening US dollar. On Thursday, the spot price for gold raced to a high of $2,069 per ounce and is now up by about +35% since the start of 2020.
“An Increase in Gold prices globally favours those who have invested in ETF at the Nairobi bourse in terms of price appreciation. Gold prices are up due to the effects of lockdowns and supply chain disruptions. Gold is a recession hedge at the moment,” said Reginald Kadzutu, Head of Retail, Zamara.
While the price of Gold has been on the up, so is the price of global US tech stocks such as Netflix, Amazon, Facebook as well as Apple. Analysts attribute the rise in the price of tech stocks to working-from-home conditions that have prevailed since the onset of COVID-19 pandemic.
Gold prices are on a spectacular rally due to a weakening US dollar. This situation makes it cheaper for foreign investors to buy precious metals like gold, palladium, silver as well as other safe havens such as US Treasuries.