Investors at the Nairobi Securities Exchange (NSE) experienced a substantial decline in paper wealth over the three months leading to June 2024, losing KES 53bn ($409.27mn), the Star newspaper reports.

This downturn comes as market volatility and political instability continue to influence investor sentiment.

According to the latest report by the Kenya Institute for Public Policy Research and Analysis (KIPPRA), the decline in market value was primarily driven by a 2.97% drop in the total value of shares traded during the period.

KIPPRA's insights indicate that the NSE's market capitalisation fell from KES1.763 trillion ($13.61bn) to KES1.710 trillion ($13.20bn) between April and June. Despite this quarterly dip, the market capitalisation shows an increase from KES1.666 trillion ($12.86bn) in June 2023 to KES1.710 trillion ($13.20bn) in June 2024, signalling a general upward trend over the past year.

The report attributes part of the volatility to political tensions, including anti-tax demonstrations driven by the Gen Z demographic, which contributed to heightened uncertainty among investors. Throughout the quarter, the market capitalisation ranged between a high of KES1.801 trillion ($13.91bn) and a low of KES1.624 trillion ($12.54bn).

In contrast to the drop in equity market value, foreign investment in bonds showed robust growth. Foreign participation surged to KES287.6bn ($2.22bn) in bond trading, a 195% increase compared to KES147.405bn ($1.14bn) in the same period the previous year.

Foreign purchases totalled KES11.578bn ($89.41mn), surpassing sales of KES8.6bn ($66.41mn). Despite this increase in foreign bond trading, foreign equity turnover share fell from 61% in the first quarter of 2024 to 34.6% in the second quarter.

The overall equity turnover improved significantly, rising from KES18.508bn ($142.86mn) in the first quarter to KES29.135bn ($224.98mn) in the second quarter of 2024. This increase reflects a positive shift in Kenya's business environment and investor confidence, enhancing liquidity in the market.

In the bond market, Kenya's Eurobond yields have steadily climbed, reaching 10.3% by June from 9.1% in April. Meanwhile, the NSE20 share index saw a 5.5% drop over the quarter, falling from 1,752.43 points in early April to 1,656.50 points by June end.

Analysts believe that recent business disruptions in Kenya are unlikely to significantly affect the country’s overall economic outlook in the short term. However, they warn that if protests and disturbances persist, they could negatively impact crucial sectors and potentially slow economic growth, Business Daily Africa reported on August 12.

While the current disruptions have not yet drastically changed the economic forecast, experts point out that ongoing unrest could have longer-term consequences. Extended protests might disrupt business activities, erode investor confidence, and negatively influence vital sectors like manufacturing, agriculture, and tourism, the Economist wrote on July 9.

Looking ahead, the NSE anticipates a boost in foreign investor participation following the inclusion of five more Kenyan companies in the Morgan Stanley Capital International (MSCI) frontier market indices. Earlier in the year, improved investor confidence and stabilisation of the Kenyan shilling had pushed the NSE's market capitalisation to KES1.8 trillion ($13.90bn), reflecting a positive market trajectory.

Global and regional market dynamics also varied, with Kenya's NSE20 index declining while South Africa’s FTSE All Share Index, Egypt’s EGX30, and Nigeria’s NGSE30 all reported gains. This reflects a diverse range of investor sentiments across the African continent.