Foreign investors continued to pull money out of the Nairobi Securities Exchange (NSE) in 2025, marking a sixth consecutive year of net selling as offshore funds favoured liquidity and capital protection over domestic market gains.
This trend held even as Kenyan shares delivered two strong years in succession in 2024 and 2025, revealing a widening gap between the NSE’s performance and foreign investor sentiment. Total net foreign outflows reached KSh 11.6 billion in 2025, extending a sell-off that began in 2020. Although the pace of exits slowed compared with the sharp withdrawals seen between 2022 and 2024, the overall direction remained firmly negative. Foreign investors have now reduced their exposure for six straight years, despite the NSE All-Share Index recording its strongest two-year stretch since inception.
A closer look at monthly flows shows a clear pattern. Selling pressure was evident in the first quarter, softened during the second, and then intensified again in the latter half of the year. June and August briefly registered inflows of KSh 820 million and KSh 1.65 billion respectively, but both gains were swiftly unwound. September alone posted almost KSh 5.0 billion in net outflows, followed by a further KSh 2.9 billion in November. Together, these two months accounted for the bulk of the year’s foreign selling, underlining the lack of sustained re-entry into the market.
The behaviour suggests tactical positioning rather than renewed long-term commitment. Offshore investors appeared to sell into market rallies to trim exposure, not to rebuild holdings. December’s near-flat foreign activity reinforced the view that portfolio rebalancing, rather than conviction buying, was driving decisions.
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Trading data points to a deeper structural shift. Prior to 2019, foreign investors regularly made up more than 60% of monthly NSE turnover, with several periods exceeding 75%. That dominance has steadily declined. Since 2022, foreign participation has become both lower and more erratic, frequently dipping below 45%. In September 2025, it fell to 28.0%, one of the weakest levels recorded since 2010.
Meanwhile, local investors have stepped in as the market’s stabilising force. Pension schemes, insurers, fund managers and retail players increased their equity exposure as interest rates peaked and later eased. Domestic capital absorbed much of the foreign selling, particularly in large banking stocks and high-dividend counters, helping to prevent the sharp price swings that would once have followed prolonged offshore exits.
Broader global allocation trends help explain the persistent caution among foreign funds. Frontier markets continue to face pressure from tight global liquidity, index exclusions, currency risk and competition from higher-yielding assets in developed economies. For many offshore investors, Kenya has increasingly become a source of ready liquidity rather than a destination for long-term capital deployment.
