Local participation however enhanced market stability and reduced vulnerability. Nairobi Securities Exchange recorded an Sh8.8 billion net foreign investor outflows between January and March 2026, official data shows. The 90 percent jump compared to the previous quarter comes in the wake of the Middle East crisis, which triggered a sell-off by investors seeking to move to other markets amid uncertainty.
Capital Markets Authority Soundness Report for the third quarter of the 2025-26 financial year (January-March), notes that the trend reflects heightened capital flight and a shift in investor sentiment away from the domestic markets. The proportion of foreign investor participation in the equities market (buying and selling stocks and shares of companies) declined by 10 per cent, further indicating reduced foreign participation.
“The significant outflows observed during the quarter can largely be attributed to prevailing geopolitical tensions in the Middle East region, which prompted global investors to rebalance their portfolios in favour of safer investment destinations and lower-risk assets,” CMA says in its report.
This, as Kenya, a frontier market, remains susceptible to external shocks and their associated spillover effects, including reduced capital inflows and heightened market volatility. Despite the substantial foreign investor exit, the equities market demonstrated strong performance during the quarter.
This resilience has been pegged on the growing role of domestic investors in supporting market activity and sustaining liquidity. Local participation has enhanced market stability and reduced vulnerability to abrupt capital reversals associated with external investor movements.
Despite the ongoing global crisis, the domestic market performed strongly during the quarter. The four market indices, NSE 20 Index, NSE 25 Index, NASI, and NSE 10 Index closed at 3,431.56, 5,416.72, 194.82, and 2,030.35 basis points, respectively, reflecting gains of 9.31 per cent, 6.28 per cent, 4.42 per cent, and 3.32 per cent.