Foreign investors cashed in on shares worth Sh4.55 billion on the Nairobi stock market in August, taking advantage of a rally in blue-chip share prices to secure profits on their investment.
The August net sales, which rose from Sh1.35 billion in July, represented the biggest monthly foreign outflow in 10 months.
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 Group, KCB Group and Co-operative Bank of Kenya touched multi-year or all-time highs.
Safaricom, the largest company on the Nairobi Securities Exchange (NSE), is trading at Sh37.65 a share, representing a gain of 33 percent since the beginning of the year.
Equity touched an all-time closing high of Sh106 on Friday, having climbed 57 percent since January, while KCB touched an all-time high of Sh99.25 on Wednesday, translating to a 49 percent gain in the year to date.
The foreign traders usually concentrate their activities on these select large and liquid stocks, alongside others such as Co-operative Bank of Kenya and East African Breweries Plc (EABL) that have the necessary liquidity to support easy purchase and sale of large volumes of shares.
The stocks being offloaded by foreigners have been bought by local corporate investors, primarily cash-rich fund managers and pension funds that have been diversifying from government bonds whose interest rates have declined.
Latest data from the Retirement Benefits Authority (RBA) shows that in the six months to June 2026, pension funds raised their investment in listed equities by Sh130.51 billion to Sh443.35 billion, an increase of 41.7 percent.
This increase lifted equities’ share of total pension assets to a five-year high of 14.37 percent, from 11.13 percent at the end of last year.
At the same time, they cut their exposure in government securities by Sh35.14 billion, or 2.4 percent, to Sh1.43 trillion from Sh1.47 trillion.
The shift to equities investments has coincided with a strong recovery on the NSE, supported by improved corporate earnings, dividend payouts and renewed local investor confidence in the stock market.
For foreign investors, this has created a good opportunity to exit the market at premium prices, rewarding those who entered the market during the bear run between 2015 and 2023.
That lean period at the market was characterised by local investor apathy, leaving foreign investors to dominate trading with participation ratios of up to 80 percent.
Foreign investors are also looking at improving returns from assets in developed markets -particularly the US- as interest rates rise due to higher global inflation caused by the conflict in the Middle East.
The higher rates, combined with the dollar’s status as a safe haven currency in times of global geopolitical shocks, has led to some investors pulling capital from riskier emerging and frontier markets like Kenya.
The NSE has also seen more of its stocks gain visibility among foreign investors due to the inclusion of additional stocks in the closely watched Morgan Stanley Capital International (MSCI) emerging and frontier market indices, amplifying foreign inflows and outflows.
Kenya’s NSE is represented by 17 companies on the MSCI frontier and small caps indices that are selected based on a number of metrics including liquidity and financial stability, giving them the exposure to the foreign investors that boosts their price discovery.
Safaricom, Equity, EABL, KCB, Co-op 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.