The Nairobi Securities Exchange (NSE) closed the second quarter of 2026 with its strongest three-month performance since the post-pandemic recovery rally of 2021, with the NSE-20 Share Index gaining 18.4 per cent over the April-to-June period and market capitalisation rising by Ksh 312 billion to reach Ksh 2.14 trillion.
The rally was driven by a combination of structural and cyclical factors: a stabilising Kenyan shilling that reduced the currency risk premium that had deterred foreign portfolio investors since 2022, a drop in short-term interest rates following the Central Bank of Kenya’s two consecutive rate cuts in February and May, and improving corporate earnings across the banking and telecommunications sectors.
Foreign Investors Return
The most analytically significant development of the quarter was the return of foreign portfolio investors to net-buyer status. After five consecutive quarters in which foreign investors were net sellers at the NSE — withdrawing capital as the shilling weakened and Kenya’s IMF programme negotiations created uncertainty — the second quarter of 2026 recorded net foreign purchases of Ksh 18.7 billion.
NSE Chief Executive Officer Kiambuthi Waithaka attributed the turnaround to a combination of macro stabilisation and deliberate market-development work. “The shilling’s recovery from its 2023-2024 lows has removed the most immediate concern for dollar-denominated investors,” he told ZaKenya.com. “But we have also spent two years improving post-trade settlement infrastructure and deepening liquidity in our top-ten counters. Those structural improvements matter.”
Safaricom remained the exchange’s most actively traded counter and the single largest driver of market capitalisation change, with its share price rising 22 per cent over the quarter on the back of strong M-Pesa transaction volume data and an analyst upgrade by Absa Bank’s regional equity research desk. The telecoms giant’s 5G network, now covering Nairobi, Mombasa, Kisumu, Nakuru, and Eldoret, has opened a new revenue stream in enterprise connectivity that the market is beginning to price in.
The banking sector also performed strongly. Equity Group, KCB, and Co-operative Bank all reported improved net interest margins following the rate environment shift, and Equity’s regional expansion — its subsidiaries in DRC, Rwanda, and Uganda contributed 34 per cent of group profit before tax in Q1 2026 — has reframed the bank as a pan-African institution rather than a Kenya-concentrated risk.
Domestic Investor Participation Grows
A more structural and arguably more encouraging trend is the growth of domestic retail participation. The NSE’s self-service online account-opening platform, launched in late 2024, had registered 112,000 new individual accounts by the end of June 2026. The median new account holder is 29 years old — a demographic cohort that has come of investing age in an era of mobile-first financial services and, since the Gen Z political awakening of 2024, heightened interest in understanding and participating in the formal economy.
The Capital Markets Authority (CMA) has supported this trend through a financial literacy campaign delivered via TikTok and YouTube — an unconventional choice for a regulatory body that has nonetheless generated 47 million views since January. CMA Acting Chief Executive Officer Waweru Mwangi said the campaign was a direct response to the realisation that the exchange’s brand recognition among under-35 Kenyans was near zero before 2024.
Risks and the Road Ahead
Not all market watchers are unambiguously optimistic. The rally has been concentrated: the top seven counters by market cap accounted for 79 per cent of total turnover in Q2, meaning that the index performance flatters the breadth of genuine market recovery. Mid-cap and small-cap counters remain thinly traded and illiquid, and several listed companies — particularly in the manufacturing and retail sectors — are reporting continued margin pressure from elevated energy costs and residual effects of last year’s excise tax increases.
The IMF’s sixth review of Kenya’s programme, expected in August, will also be watched closely. A positive review outcome would signal continued fiscal consolidation and could trigger further sovereign credit rating improvement, which typically brings another wave of emerging-market index inclusion interest. A negative review — or renewed shilling volatility — could quickly reverse the gains of the past quarter.
For now, however, the mood on Kimathi Street is cautiously positive, and analysts who spent 2023 and 2024 writing bearish research notes are finding their messaging becoming more balanced.
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