Foreign investors’ outflow at the Nairobi Securities Exchange (NSE) eased in the last three months of the year, after clocking a decade high in the quarter to September.
Although the regulator did not give reasons for this trend, analysts link the slowdown to uncertainties in mature markets following several policy pronouncements by the US President, Donald Trump.
“Investors were taken aback by the US activities in Venezuela, Greenland, and the Middle East in the quarter to December. The Russia-Ukraine crisis continues to register a sizeable level of uncertainty,’’ a market analyst, Daniel Messo, told the Star.
The quarterly soundness report by the Capital Markets Authority released on Thursday shows that foreign flows stabilized, with the market registering a marginal net inflow of Sh9 million in December, while foreign participation rose sharply to 42.6 per cent, the highest level recorded during the quarter.
In October, foreign investors recorded a net outflow of Sh1.6 billion, while overall foreign participation rose to 36 per cent, indicating heightened trading activity.
This trend persisted into November, with net outflows widening to Sh3.02 billion while participation declined to 32.37 per cent, suggesting a temporary moderation in foreign engagement.
“This elevated participation likely reflects profit taking, sector rotation, or portfolio rebalancing.”
This was, however, much better compared to a 30 per cent participation recorded in the previous quarter as investors rushed to gain from stable markets in the US, Japan, and Europe.
Data by the regulator shows average foreign participation fell from 57 per cent in 2022 to 48 percent in 2023, and to about 38 per cent in 2025, even though total quarterly turnover remained robust at Sh46.2 billion in Q3.
According to the report, local investors did follow the wave. They increased participation, accounting for an average of 60 per cent of all market turnovers during the quarter.
This was, however, a 10 per cent drop compared to September, when domestic activities accounted for 72 per cent, the strongest reading since 2010.
Analysts link the flight to higher returns and lower risk appetites in developed markets such as the US, UK, China, and Japan, where strong earnings, AI-driven stock gains, and stable currencies continue to attract capital.
Market concentration in the quarter under review remained elevated, averaging around 66 per cent, the lowest in the quarterly series.
The concentration ratio peaked at 67.01 per cent in October before moderating slightly to 66.12 per cent in November and finishing the year at 66.42 per cent.
“Compared to the broader annual trend, which saw concentration gradually rise at the start of the year, Q4 figures indicate that market share among leading participants had largely plateaued at higher levels,’’ the report reads.
Overall, the market in 2025 remained heavily concentrated in a few large-cap stocks, reflecting a consolidated structure and uneven liquidity, while mid- and small-cap stocks experienced lower activity.
The report indicates that improving investor awareness and access to information could help broaden investment across a wider range of stocks, fostering a more balanced and resilient market.
Generally, the Equities market in the fourth quarter and throughout 2025 posted impressive gains across its major equity indices, marking one of the strongest annual performances in recent years.
The NSE All Share Index (NASI), which tracks the overall market, climbed over 50 per cent year-on-year to close the year at around 186.58 points, while the NSE 20 Share Index rose by more than 56 per cent, ending near 3,139 points.
Other key sub-indices also performed strongly, with the NSE 10 Share Index increasing by approximately 50 per cent to finish at 1,965.20 points, and the NSE 25 Share Index rising by around 49 per cent, closing the year at 5,096.68 points.
In the money market, the Kenyan government issued bonds worth Sh200 billion in Q4, which attracted subscriptions of Sh415.07 billion, reflecting continued strong investor interest and notable oversubscription.
Compared with the third quarter, Q4 saw slightly lower overall subscription volumes but sustained selective demand, particularly for medium-term fixed-rate bonds, highlighting cautious positioning among investors toward longer maturities amid global uncertainties.
by VICTOR AMADALA
