Investors at the Nairobi Securities Exchange continued to count their losses as the market recorded a slump in trading activities.
A look at last week’s market intelligence reports indicate that the NSE-20 and the NSE-25 indices posted an average of 0.4 per cent and 0.1 per cent drop in value respectively, sustaining a decline recorded in recent months.
This is as foreign investors react to new levies introduced in the country’s tax code. “Market activity cooled relative to yesterday’s session; equity turnover nose-dived 44 per cent to Sh480 million on reduced trading across most large caps,” explained Standard Investment Bank (SIB) in its market analysis report released on Friday last week. Since January 2018, the NSE-20 share index, NSE-25 share index and all share index (Nasi) have fallen 22 per cent, 11.1 per cent and 11.9 per cent respectively. “Foreign investors sustained their bearish position at the bourse, recording net outflow of 71.6 million – 81.9 per cent lower than the previous session,” explained SIB.
The Finance Act, 2018 signed by President Uhuru Kenyatta amended various tax regulations, introducing new levies on income tax, value added tax (VAT), excise duty and stamp duty. Among the new taxes are an eight per cent VAT on petroleum products as well as excise duty of Sh20 per kilogramme on sugar for confectioneries. Treasury also doubled excise duty on fees charged by banks and money transfer agencies from 10 per cent to 20 per cent, and introduced 15 per cent excise duty on telephone and internet data services.
A proposed 0.5 per cent levy on bulk cash transfers was scrapped after successful lobbying by financial sector stakeholders. The Kenya Association of Manufacturers and the Kenya Private Sector Alliance on separate occasions last week asked the Government to clarify the provisions introduced through the Finance Bill 2018, stating that some of them were ambiguous and time-barred. The lobbies want a multi-sector task force established to chart the roadmap for aligning the new tax changes to the existing policy framework to make compliance seamless.
Investment firm Cytonn said the trend was likely to continue into the near term as foreign investors respond to changing fiscal policy in the US. “During the week, foreign investors remained net sellers with the net outflow decreasing by 33.2 per cent to 800 million, from 121 million the previous week,” said Cytonn in its market report. “We expect the market to remain subdued in the near term as foreign investors exit the broader emerging markets due to the rising interest rates in the US coupled with the strengthening of the dollar.”
[BUSINESS] Jitters in market as investors react to the new tax measures: Investors at the Nairobi Securities Exchange continued to count their losses as the market recorded a slump in trading activities. https://t.co/RFzo1oW1by
— Breaking News (@News_Kenya) October 8, 2018