The Nairobi Securities Exchange (NSE), which lagged African counterparts in dollar returns due to the shilling’s 6.8 percent decline in the first quarter of the year, lost some of its appeal to foreign investors.

In the three months leading up to March, the Morgan Stanley Capital International (MSCI) Kenya Index, which advises foreign investors on local market assets, showed a return of -20.2.

None of the other nine African markets that the index tracked had a return that was less than a negative 7%. In the time frame, four of the markets—Nigeria, Senegal, Tunisia, and Zimbabwe—had gains ranging from 1.8 percent to 41 percent. The returns from the other five markets—South Africa, Egypt, Botswana, Mauritius, and Morocco—ranged from -1.3 to -6.1 percent.

In order to reflect the rising interest rate environment, US Treasury bond yields have been increasing. Foreign investors have thus been trying to lower the amount of risk they are taking in frontier markets. This led to worries regarding dividend and return repatriation, which were then compounded by the country’s falling shilling and dollar liquidity restrictions.

Due to its position as the most valuable company on the NSE, Safaricom has the most weight in the MSCI Kenya Index. However, over the past quarter, its price has fallen by 25%. While Equity saw a 2.2 percent increase, KCB’s share price fell by 6.8 percent.

The benchmark NSE 20 Share Index decreased by 3.2 percent during this time, while the All-Share Index dropped by 11.5 percent.

Due to the stock’s high liquidity and strong financial performance, including profits and dividends, foreign investors have disproportionate exposure to it.

The exchange losses that international investors would incur if they converted their sales to dollars exacerbated their paper losses, which is why the MSCI index fell more precipitously than the NSE’s shilling indices.

Foreign investors exchange their dollars for shillings when they first enter the market, and they do the opposite when they exit to move money abroad.

Therefore, the performance of the dollar versus the shilling has a significant impact on the stock market for international investors, who may experience exchange losses or profits depending on whether the shilling is weakening or strengthening against the dollar.