The stock market has shed Sh158 billion in investor wealth over the past week after the share prices of blue-chip firms retreated under pressure from investors keen to profit from the market rally through August.
Market capitalisation -the measure of investor wealth- dipped to Sh4.126 trillion as at the close of trading on Tuesday, from its all-time high of Sh4.285 trillion that was achieved on September 3.
The sales at the Nairobi Securities Exchange (NSE) have also come in the wake of rising jitters among international investors over the escalation of tensions in the Middle East due to the US-Israel war against Iran.
Attacks by Yemeni Houthi rebels on the Red Sea shipping channel have also caused a jump in benchmark oil prices, triggering fears of a new round of higher global inflation.
Large stocks, including Safaricom, Equity Group, KCB Group and Co-operative Bank of Kenya, have led the market correction, collectively accounting for Sh113.6 billion in capital losses over the period.
The valuation loss comes on the back of a strong rally at the bourse from mid-August, when it crossed the Sh4 trillion market cap milestone for the first time. This rally was primarily driven by the same large counters that are now subject to profit-taking, with Equity, KCB and Co-op Bank touching all-time highs of Sh106, Sh98.55 and Sh38.55 per share a week ago.
Safaricom share price closed at Sh36.50 on Tuesday, meaning its valuation has declined by Sh58 billion since September 3 to Sh1.46 trillion. Equity closed at Sh101.75 per share, cutting its valuation by Sh16 billion from its all-time peak of Sh400 billion.
KCB’s share price stood at Sh90 at close of trading on Tuesday, meaning its valuation has dropped by Sh27.4 billion to Sh289.2 billion. Co-operative Bank has meanwhile shed Sh13.8 billion to stand at Sh212.4 billion, after its share price dropped to Sh36.20.
‘The correction on large counters over the last few days is mainly due to investors taking profits and locking in substantial capital gains after the strong rally over the first half of the year,’ said Melodie Ndanu, a research analyst at Standard Investment Bank.
‘Investors are also pricing in the potential impact of higher crude oil prices on inflation following the developments in the US-Israel-Iran tensions, and the implications of the upcoming decision by the US Federal Reserve regarding interest rates given economic conditions.’
Due to the rising geopolitical tension, the rate on US 10-year bonds hit the key five percent threshold for the first time since 2023 on Monday, as markets priced in the likelihood of the Fed keeping its interest rates higher ?for longer on renewed inflation pressure.
The benchmark US 10-year bond rate is a closely watched gauge of market inflation expectations, with its movement influencing investor activity across the globe.
For the equities markets, higher US bond rates tend to cause capital flight from smaller, riskier markets, especially when they are accompanied by a strengthening of the dollar in the forex market.
The capital flight ultimately weighs down share prices of stocks that are favoured by foreign investors.
On the NSE, foreigners cashed in on shares worth Sh4.55 billion in August, taking advantage of a rally in blue-chip share prices to secure profits on their investment.
‘Foreign investors may also be using the rally opportunity to exit and reallocate funds toward safer global assets as the global outlook shifts,’ said Ms Ndanu.
Market trade data shows that their net sales accelerated in the second half of last month, coinciding with the period when stocks such as Safaricom, Equity and KCB were climbing towards multi-year or all-time highs.
In the first two weeks of September, foreigners have made further net outflows of Sh1.6 billion, even as some locals join in the sales to lock in their own profits.
The foreign traders usually concentrate their activities on these select large and liquid stocks, alongside others such as Co-operative Bank and EABL, that have the necessary liquidity to support sizeable trades and ease of entry and exit.
The stocks being offloaded by foreigners were taken up by local corporate investors, primarily cash-rich fund managers and pension funds that have been diversifying from government bonds whose interest rates have declined.
A larger number of NSE stocks have gained visibility among foreign investors due to their inclusion in the closely watched Morgan Stanley Capital International (MSCI) emerging and frontier market indices, amplifying foreign inflows and outflows.
Kenya is represented by 17 companies on the MSCI Frontier and small-cap indices that are selected based on a number of metrics, including liquidity and financial stability, giving them exposure to foreign investors that boosts their price discovery.
Safaricom, Equity Group, EABL, KCB Group, Co-operative Bank and Standard Chartered Bank Kenya are listed on the MSCI Frontier Markets Index, as at the most recent review of May 2026.
BAT Kenya, KenGen, Kenya Re, Kenya Power, DTB Group, Carbacid, Bamburi Cement, Jubilee Holdings, CIC Insurance Group, Centum Investment and HF Group are on the MSCI Frontier Markets Small Cap Index.
Other countries included on the frontier markets indices are Zimbabwe, Tunisia, Morocco, Nigeria, Senegal, Mauritius and Côte d’Ivoire.
South Africa, which has the largest and most liquid stock market in Africa, and Egypt are classified as emerging markets by the MSCI.