As the effects of political tensions manifested in the markets, foreign investors were compelled to dispose of their portfolios in Kenya and redirect their investments to safer markets.
According to The Star, between September and December 2024, foreign investors withdrew a substantial Sh16 billion from the Kenyan economy, primarily driven by political tensions.
Kenya has been grappling with escalating tensions, culminating in mass protests driven by the younger generation.
The protests, which turned violent in June last year, significantly disrupted the country’s political and economic stability, resulting in substantial consequences.
The protesters demanded government action on pressing economic issues such as inflation, high unemployment, and corruption.
Kenya’s economy feels the heat
The economic impact was severe with the Nairobi Securities Exchange PLC, (NSE) reporting a loss of about $600m in investor wealth in two weeks due to the protests, which had seen businesses looted by protesters.
Investors suffered significant paper wealth losses, while over 30 were reportedly killed further exacerbating the economic instability.
Moreover, data released by the Capital Markets Authority (CMA) indicated that the stability of the Kenyan shilling towards the end of 2024 failed to reassure investors, as fears of “political” abductions spread.
According to the Capital Markets Authority (CMA), the equity market experienced a significant net outflow of Sh16.639 billion in the fourth quarter of 2024, a dramatic increase compared to the Sh628 million recorded in the third quarter of the same year.
“The rise in capital outflow is mainly linked to the effects of political instability in the country during the second quarter of 2024, which likely caused foreign investors to pull out of the market,” CMA said in its quarterly Capital Markets Soundness Report.
CMA Chief Executive Wycliffe Shamiah highlighted that despite the outflows, there were positive developments in the market.
The report noted that the market volatility for the three market indices, NSE20, NSE25, and NASI, remained low, below one per cent and all indices increased compared to Q3. 2024.
“The improved performance across the three indices is driven by heightened participation in the capital markets from both retail and institutional investors despite increased foreign capital outflow,” Shamiah added.
The proportion of foreign investors actively trading increased slightly, from 42.07% to 43.83%.
This indicated that foreign investors maintained an active presence in the market, showing continued engagement despite the prevailing challenges.
