World Courant
The Kenyan inventory market has struggled to impress buyers and has recorded a deeply bearish run this yr.
In accordance with Bloomberg’s evaluation of 92 international benchmarks, the Kenyan inventory market is the worst performer on this planet. Nairobi’s inventory index is down 32% in 2023. Which means shares in East Africa’s largest financial system at the moment are cheaper than ever in comparison with broader rising markets. Shares in Nairobi commerce at about 3.6 instances estimated 2024 earnings. That is in comparison with 7.3 instances for the Nigerian benchmark, 9.4 instances for Johannesburg shares and eight.8 instances for MSCI Inc.’s index of rising markets. Nonetheless, buyers will not chew.
The Nairobi Inventory Alternate has witnessed a mass exodus of overseas buyers this yr. International buyers withdrew as a lot as $98 million within the first quarter of 2023, and capital flight has not stopped since. Between the primary and second quarters, they raised one other $17.7 million. The inventory market has seen solely two constructive inflows previously six months.
One of many major causes is the scarcity of Kenyan {dollars}. Kenya’s overseas reserves have plummeted and the Kenyan shilling has misplaced 19% of its worth in opposition to the greenback this yr. It usually takes days and even weeks for buyers to efficiently withdraw their cash. As an alternative, they’re conserving their cash in native authorities bonds, that are presently yielding the very best returns in eight years. Yields on authorities bonds with maturities of 364 and 182 days are above 15%, virtually the very best since November 2015.
Fitch Scores stated it may downgrade the nation’s credit standing relying on how a lot of its overseas reserves it makes use of to settle funds on a $2 billion Eurobond maturing in June. “Deploying reserves to redeem the Eurobonds would scale back import protection, which may nonetheless contribute to a downgrade of Kenya’s ranking, relying on the extent of borrowing and the prospects for different sources of exterior financing, Fitch stated in a single rack revealed on Tuesday.
One more reason is excessive inflation in Kenya, which now stands at 6.9%, the very best stage in three months. It has led to rising rates of interest, making it enticing for buyers to save cash or spend money on low-risk autos.
Furthermore, the valuation of the Kenyan inventory market relies upon closely on the efficiency of some huge names. Safaricom Plc, the nation’s telecom big, accounts for 41% of the index. But it surely has misplaced virtually half its worth this yr. Safaricom was beforehand the darling of offshore buyers attributable to its success with cellular cash. Nevertheless, buyers have been cautious because the firm began coming into the Ethiopian market.
Final yr overseas buyers Raised $170 million of the Kenyan inventory market, citing escalating international dangers.
Why the Kenyan inventory market is the world’s worst performer this yr
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