When the war in Iran broke out, global equities markets were hit by selloffs as investors fled to the safety of dollar holdings amid fears of rising inflation and economic recession.
This stopped the rally at the Nairobi Securities Exchange (NSE), as foreigners sold shares worth a net of Sh4.3 billion in March, largely on large blue chips that have high exposure to international investors.
Local institutions were also offloading equities to keep a liquid position in order to take advantage of potentially higher fixed income returns if higher inflation pushes the Central Bank of Kenya to raise interest rates.
The result has been a sharp contrast in the performance of the bourse before and after the war started on February 28. In the first two months of the year, the bourse recorded a 15.3 percent growth in investor wealth, equivalent to an increase of Sh453.5 billion to Sh3.41 trillion.
The subsequent two months have seen the market add just 0.5 percent or Sh17.3 billion in market capitalisation, the measure of investor wealth.
The slower growth post February is despite the NSE bringing on board a new listing of the Kenya Pipeline Company (KPC) on March 11, which has added Sh167.9 billion in valuation to the bourse.
Excluding the KPC entry, the market would have shed 4.4 percent or Sh150.63 billion since the Iran war, showing the extent of the dips among the counters that were already in the market.
Safaricom has accounted for the largest valuation decline since the end of February at Sh88.1 billion or 6.9 percent to Sh1.19 trillion, followed by KCB Group at Sh39.4 billion or 15.3 percent to Sh218.5 billion.
As the bourse’s largest and most liquid company, Safaricom is heavily traded by foreign investors, with its movement also influencing the general market performance due to its heavy weight on the indices.