The Nairobi Securities Exchange (NSE) gained Sh19.88 billion on Wednesday, breaking a three-day losing streak that started last Friday when Israel attacked nuclear and military sites in Iran, sparking deadly exchanges.
Safaricom, the most valuable stock on the NSE, gained Sh0.50 or an equivalent of Sh20.03 billion to halt a three-day losing streak that had seen investors at the Nairobi bourse shed Sh71.83 billion in the three days amid anxiety over the Middle East war.
The market unease sparked reduced activity by forcing investors at the Nairobi bourse, as analysts warn that reduced hopes for a quick de-escalation in the conflict will continue to weigh on shares.
Nineteen out of the 47 stocks that traded on Wednesday posted declines in prices, extending a trend that started on Friday.
Analysts say investors were spooked by the Israel-Iran conflict, which has seen counters where foreigners dominate trading record a drop in share prices.
Before the Israeli hit on Iran, the NSE had witnessed a rally that saw the bourse gain Sh214.19 billion between June 2 and June 12, when the market closed at Sh2.325 trillion.
Stocks in the US edged higher Wednesday, reversing some of Tuesday's decline as investors adopted a wait-and-see mode over the Middle East conflict.
Rising tensions in the Middle East have fueled concerns of disruption in the Strait of Hormuz, through which roughly one-fifth of the world's petroleum is ferried.
Meantime, Trump is considering a potential strike on Iran.
Hopes for a quick resolution to the Israel-Iran conflict have dimmed, and the U.S. has expanded its military footprint in the region.
In Kenya, foreign investors' net inflows—the difference between their purchases and sales—fell from Sh383.09 million on June 12 to Sh296.42 million the next day, before sliding further to Sh169.25 million by Tuesday, according to data from AIB-AXYS.
The net buying slowed further to Sh4.82 million on Wednesday, coinciding with the day trading activity decreased by 69.2 percent to Sh275.26 million, down from Sh892.27 million in the previous session and Sh1.27 billion on Thursday last week before the Israel attack on Iran.
The top five stocks on NSE—Safaricom, Equity, East African Breweries, KCB Group and Standard Chartered Bank—which account for about 66 percent of the Sh2.273 trillion market capitalization, have come under pressure over the past few days.
Safaricom, which had hit Sh24.90 on Thursday last week—the highest level since November 2022—retreated to Sh23 by Tuesday, before recovering to Sh23.50 on Wednesday.
StanChart closed on Wednesday at Sh284.50, a drop from Sh284.75 on the previous day but higher than Sh270 on Thursday last week. Equity has remained unchanged at Sh46.10 while KCB has seen its share retreat to Sh44.15 from Sh44.30 over the same period.
Wesley Manambo, senior associate for research at Standard Investment Bank, said investors hit by uncertainties such as elevated risk of war are likely to move their investments into cash or near-cash securities in markets where they have more confidence.
"This is what may have contributed to the lag we saw on the NSE over the past few days. While the four-day data may be insufficient to fully attribute the decline to the Israel-Iran conflict, such uncertainties typically prompt investors to retreat to familiar markets or those they understand better," said Mr. Manambo.
He explains that given that nearly 70 percent of the NSE turnover is dictated by foreigners, activities such as the Middle East tension are likely to impact the market.
Ronny Chokaa, senior research analyst at Capital A Investment Bank, said while the Israel-Iran conflict had slowed the momentum at the NSE over the past few days, this looks set to reverse in line with what is being seen globally.
"Certainly, geopolitics has had an effect over the past few days. But in spite of this, we are still seeing foreign investor inflows. It is almost as if investors are becoming numb to the geopolitical play," said Mr Chokaa.
Mr Chokaa added that he expects the NSE to recover just as was the case in April when the market dipped but recovered shortly after US President Donald Trump announced a 90-day freeze on trade tariffs.
Mr Trump said on Tuesday he would be willing to extend the July 8 deadline for completing trade talks with countries before higher US tariffs take effect.
Mr Chokaa said since the start of June, foreign investors have shown increased interest in key blue chips such as Safaricom as returns on investment classes such as Treasury bills and Treasury bonds drop. He expects this momentum to pick up unless the Israel-Iran conflict flares further.
"Over June, there has been a return to bullishness, especially on key blue-chips. The decline in interest rates has triggered a move from cash and near-cash assets into equities after a close to three-year stint of discounted valuation on the bourse," said Mr Chokaa.
Year to date, the NSE has gained Sh288.49 billion in market value, having opened the year at Sh1.985 trillion. Analysts argue that this promises to be a good year for investors to bet on the NSE despite shocks from geopolitics and tariff wars.
"It should be a good year for equities considering what is happening in the bond market unless a black swan event happens and throws everything off balance," said Mr Manambo.
