Kenya’s equities market exhibits signs of recovery in 2024 , with the NSE 25, NSE 20, and NASI experiencing gains of 4.1%, 2.4%, and 1.3%, respectively, year to date.
This follows a dismal performance in 2023, where the Nairobi Securities Exchange (NSE) incurred a 28% loss, equivalent to KES 554.0 billion of investors’ wealth. As of February 28th, 2024, the NSE 20-share index, tracking the top 20 companies, rose to 1544.6 from 1501.2 points at the end of 2023.
Likewise, the Nairobi All Share Index (NASI), reflecting all stock performance, increased from 92.1 to 93.1 points during the same period.
Several factors contribute to the improved equities market performance in Kenya for 2024. Firstly, there’s an enhanced macroeconomic environment as Kenya’s economy rebounds from the impacts of the COVID-19 pandemic, inflationary pressures, and global supply chain disruptions.
Projections indicate a GDP growth rebound to 5.0% in 2024 from 4.8% in 2022, according to the World Economic Outlook. Inflation rates have declined from 9.2% in February 2023 to 6.3% in February 2024, as reported by the Central Bank of Kenya (CBK).
The exchange rate of the Kenyan shilling against the US dollar stabilizes after a sharp depreciation in 2023 due to increased US Federal Reserve interest rates and the Russian-Ukraine conflict.
The CBK intervenes in the foreign exchange market, raising the Central Bank Rate (CBR) to stabilize the shilling and curb inflation, with the CBR raised from 12.5% to 13.0% in February 2024, marking the fourth raise since 2023.
Secondly, increased investor confidence, both domestic and foreign, contributes to the market’s recovery. The successful buyback of Kenya’s USD 2.0 billion Eurobond, maturing in June 2024, and the issuance of a new Eurobond improve investors’ perception of Kenya’s credit risk.
The equities market sees increased activity with positive turnover growth for four consecutive weeks, despite foreign investors remaining net sellers year to date.
The government’s efforts to diversify financing sources by issuing long-term debt instruments, such as infrastructure and treasury bonds, aim to reduce interest rate and refinancing risks, as well as the crowding-out effect on the private sector.
Lastly, positive corporate performance, particularly in banking, telecommunications, and manufacturing sectors, propels the equities markets. These sectors benefit from increased demand for their products and services.
Kenya’s equities markets perform well in 2024 due to improved macroeconomic conditions, increased investor confidence, and positive corporate performance.
Nevertheless, challenges and risks persist, including geopolitical tensions, high public debt, regulatory and governance issues, and expected re-adjustment of yields on government papers, likely driving more investors into equities markets as government paper yields become less enticing.
