Investor wealth at the Nairobi Securities Exchange (NSE) fell Ksh95 billion ($942 million) in May as key stocks came under pressure from heavy foreign investor selloffs at the end of the dividends season.
The fall in market capitalisation came even as traded turnover rose to Ksh18.4 billion ($183.3 million) from Ksh15.1 billion ($150.4 million) in April, and analysts at Cytonn Investments said the movement was also indicative of investors looking to cash in on capital gains realised in the first quarter of the year.
Foreign investors sold a net of Ksh4 billion ($40 million) during the month of May, leading to erosion of the indices dominated by heavily traded bank stocks, according to market data compiled by Standard Investment Bank (SIB).
The NSE 20 share index fell 10.8 per cent and the All Share index by 3.9 per cent.
Large counters such as EABL, down six per cent in May, Equity Bank (-4.1 per cent), KCB (-8.0 per cent), Co-operative Bank (-8.4 per cent) Standard Chartered (-3.3 per cent) and Barclays Kenya (-10.9 per cent) dragged down the market cap and the NSE 20 share index.
Cytonn said foreign investors were net sellers for the month, as they sought to realise capital gains on various counters, in addition to receiving dividend income.
"Most investors exited the market at the relatively healthy valuation, with possible re-entry at cheaper valuations in the future," said Cytonn said in its May markets summary.
SIB data shows that foreign participation as a percentage of equity turnover stood at 52.8 per cent during the month.
Foreign investors have traditionally limited their activity to a few large, liquid stocks that can accommodate large trades and facilitate easier exit.
Their actions therefore tend to have a significant impact on the NSE 20 index, which is made up of the blue chip stocks.
Seven of the 11 listed banks at the NSE closed their books for full year 2017 dividends in the last two weeks of April, and another in May.
Stanbic Bank, the only lender yet to close its register, does so next week, while National Bank of Kenya did not issue a dividend in 2017.
Investors normally race to be on the books of a company before the dividend closure date in order to cash in on the payout, which in turn drives up the share price due to the increased demand.
Once the books are closed however, the allure of the stock to dividend chasers drops, and with it the share price.
As a result, the nine lenders which have already closed their books saw a fall in share price during the month of between three and 21 per cent, with Stanbic the only one with an increase of 6.1 per cent.
Safaricom, which carries large weight on the NSE indices as the stock accounts for nearly half of market capitalisation, was flat during the month to close at Ksh28.25 ($0.28).
It, however, saw heavy foreign investor selloffs with net sales of Ksh3 billion ($30 million), continuing with a trend that had been seen in April.