According to a Bloomberg report on April 4th. BlackRock Inc., the world’s biggest asset manager, sees an opportunity to invest in Kenyan stocks, which have gone from the world’s worst performers in 2023 to the best this year.
In the first nine months of 2023, the Nairobi Securities Exchange (NSE) was rated as the worst-performing African stock market when looking at returns in dollars, highlighting the impact of foreign exits and global shocks on East Africa’s biggest stock market.
The most recent report reveals that the All-share stock index in Nairobi has increased by 49% when measured in dollars. This represents a recovery from a significant 43% decline in 2023, during which the index was trading at levels not seen since 2011.
The index trades at a price-to-earnings ratio of about 5.6 times. In comparison, South African stocks are at 12 times, while Nigeria at 15.9 times. South Africa’s benchmark stock index has fallen 4.2% in dollar terms while Nigeria’s has declined 4.1%.
Financial firms have been the primary drivers of these gains. Equity Group Holdings Plc, Kenya’s largest lender by market value, has seen a remarkable surge of 73% in dollar terms, while its rival, KCB Group Plc, has jumped by 66%. Safaricom Plc, the country’s largest mobile-phone company, also made significant strides with a 54% advancement. Notably, among the 63 stocks in the index, only one has declined this year.
This significant increase in value was mostly credited to the implementation of new economic policies by President William Ruto’s administration.
Bloomberg, citing Emily Fletcher, co-manager of the Blackrock Frontiers Investment Trust, reported that the company expressed confidence in the changes made to the country’s economic policies.
“This volatility has created opportunity,” she said in an emailed response. “Over the past two-years Kenya has seen substantial shifts in both fiscal and monetary policy.”
Fletcher noted that Kenya’s bonds have gained attractiveness as Ruto’s administration reduced its fiscal deficit to around 4% of the gross domestic product (GDP) and doubled its benchmark interest rate to 13% within the last two years. With a slowdown in price growth, government bonds now offer a “highly appealing real rate,” and the country has successfully refinanced its eurobond, she added.
“With a stable political backdrop, improving macroeconomic outlook and a stock market trading on five times PE, perhaps it is time for investors to re-look at the market,” Fletcher said.
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