By Robai Ludenyi
Investors at the Nairobi Securities Exchange (NSE) have lost Sh158 billion in market value over the past week as major companies experienced a decline in share prices following a strong market rally in August.
The fall has pushed the total value of companies listed on the exchange down to Sh4.126 trillion as of Tuesday’s trading close, from a record Sh4.285 trillion reached on September 3. The decline comes as investors sell shares to secure profits made during the recent rise in stock prices.
Safaricom, Equity Group, KCB Group and Co-operative Bank of Kenya have accounted for a significant portion of the losses, collectively contributing Sh113.6 billion to the decline in market capitalization.
The four companies had recorded strong gains during the market rally, with some of their share prices reaching record or multi-year highs. Investors who bought shares at lower prices are now taking advantage of the gains by selling their holdings, contributing to the recent market correction.
Safaricom has experienced the largest valuation decline among the major companies mentioned in the report. Its share price closed at Sh36.50 on Tuesday, reducing the company’s market value by Sh58 billion since September 3 to Sh1.46 trillion.
Equity Group’s share price stood at Sh101.75, resulting in a Sh16 billion decline from its previous valuation peak of Sh400 billion. KCB’s share price closed at Sh90, bringing its market value down by Sh27.4 billion to Sh289.2 billion.
Co-operative Bank also recorded a reduction in its valuation, losing Sh13.8 billion to stand at Sh212.4 billion after its share price fell to Sh36.20.
The international environment has added pressure to financial markets. Rising tensions linked to the US-Israel-Iran conflict and attacks by Yemeni Houthi rebels on the Red Sea shipping route have contributed to concerns about oil prices and global inflation.
Higher oil prices can increase the cost of transporting goods and operating businesses, creating additional pressure on economies and affecting investor confidence. Global interest rate decisions also influence how investors distribute their money between different markets.
The yield on the US 10-year Treasury bond reached five percent on Monday, its first time at that level since 2023, as markets considered the possibility of interest rates remaining higher for longer because of renewed inflation concerns.
Higher US bond yields can make investments in major global markets more attractive compared with assets in smaller and riskier markets. This can encourage some foreign investors to withdraw funds from emerging and frontier markets, placing additional pressure on share prices.
Foreign investors sold shares worth Sh4.55 billion on the NSE in August as they took advantage of the market rally to secure profits. Their net sales continued into September, with further outflows of Sh1.6 billion recorded during the first two weeks of the month.
However, local institutional investors, including fund managers and pension funds, have been taking up some of the shares sold by foreign investors. These local investors have been shifting investments from government bonds, whose interest rates have declined, towards equities.
The movement of money between local and international investors remains an important factor in determining share prices at the NSE. Large companies such as Safaricom, Equity Group, KCB and Co-operative Bank attract significant trading activity because their shares are relatively liquid and can accommodate sizeable transactions.
For investors, the changing market conditions highlight the importance of understanding the risks associated with stock market investments. While rising share prices can create opportunities for gains, changes in investor confidence, inflation expectations and global financial conditions can also reduce the value of shareholdings.