Kenya’s capital markets are witnessing one of their strongest rallies in recent years, with the Nairobi Securities Exchange (NSE) recording its largest single-week increase in investor wealth. Market capitalization jumped by more than Sh220 billion, pushing the total market value to an all-time high of about Sh3.42 trillion. As a result, total gains since the start of the year now stand at roughly Sh475 billion, representing a 16 percent increase.
This performance has placed equities firmly ahead of other investment options such as Treasury bonds and fixed deposits. While bonds continue to offer attractive returns of between 12 and 14 percent and fixed deposits average about seven percent, investors are increasingly turning to stocks in search of higher long-term returns and capital growth.
Blue-Chip Stocks Set the Pace
To begin with, the rally was largely driven by major companies that dominate the exchange. Safaricom led the surge, adding approximately Sh78 billion in market value following renewed investor demand, partly supported by its interim dividend announcement.
At the same time, banking stocks also recorded strong gains. Equity Group, KCB Group, and Stanbic Holdings saw their valuations rise significantly as investors positioned themselves ahead of upcoming financial results. These large, stable companies often attract investor confidence during periods of market optimism.
However, the gains were not limited to blue-chip firms alone. Smaller and mid-sized companies also recorded impressive growth, with several stocks registering double-digit percentage increases. This broader participation suggests that investor confidence is spreading across multiple sectors of the economy.
Mobile Trading Is Bringing in a New Generation of Investors
More importantly, the introduction of the Zidii Trader platform has played a major role in accelerating market activity. By allowing investors to buy shares directly through M-Pesa without the need for a traditional Central Depository account (CDS), the platform has made stock market participation easier and more accessible.
Consequently, trading activity has increased sharply. The number of transactions has more than doubled in some trading sessions, driven largely by retail investors entering the market through their mobile phones. This has injected fresh liquidity into the exchange and created stronger demand for shares across various companies.
In addition, the platform is helping address one of the NSE’s long-standing challenges: the low participation of local individual investors. With fewer barriers to entry, more Kenyans are now able to participate in wealth creation through equities.
Meanwhile, a Stable Shilling Is Supporting Investor Sentiment
At the same time, macroeconomic stability, particularly the performance of the Kenyan shilling, has strengthened investor confidence. According to Cytonn’s latest currency analysis, the shilling has remained relatively stable, trading at around KShs 129 against the US dollar.
This stability has been supported by strong foreign exchange reserves, steady diaspora remittances, improving tourism earnings, and better external financing conditions. As a result, inflation has remained under control, helping preserve purchasing power and economic stability.
A stable currency is important because it reduces uncertainty for investors, especially foreign investors who are sensitive to exchange rate risks. It also makes Kenyan assets more attractive compared to periods of high currency volatility.
Interest Rate Trends Are Making Equities More Attractive
In addition, recent interest rate adjustments have contributed to the growing appeal of equities. The Central Bank of Kenya’s decision to lower its benchmark lending rate has signaled a shift toward supporting economic growth.
When interest rates decline, returns from fixed-income investments such as bonds and deposits may become less attractive relative to equities. As a result, investors often move their funds into stocks, where they expect better returns through dividends and price appreciation.
This shift is already evident in the current market performance, as more capital flows into equities.
Retail Investors Are Emerging as a Key Market Driver
Perhaps the most significant development is the increasing role of retail investors. For many years, trading activity at the NSE was largely dominated by institutional and foreign investors. However, mobile trading platforms are now changing that dynamic.
With easier access, more local investors are participating in the market, contributing to increased trading volumes and improved market liquidity. This growing domestic participation is helping create a more balanced and resilient market.
This article draws on personal research and key insights from the following sources::
Business Daily Africa; Cytonn Investments Market and Currency Reports; The Kenyan Wall Street; The Star Kenya.
