News / Africa

    Kenya Election Cheers Investors, But Worries Remain

    Investors walk out of the Nairobi Stock Exchange in Kenya's capital Nairobi, Mar. 4, 2010.
    Investors walk out of the Nairobi Stock Exchange in Kenya's capital Nairobi, Mar. 4, 2010.
    Reuters
    Kenya's peaceful election has given investors an added impetus to buy assets in East Africa's biggest economy, but a legal challenge to the result and the possible international trial of the winner could dampen enthusiasm.

    Kenya, like many other frontier markets, is enjoying strong growth, with its rising consumer class and high bond yields attracting international investors.

    Kenya's stock market hit four-and-a-half year highs and the shilling surged to four-month highs after the declaration last weekend of Uhuru Kenyatta as president, without the 2008 post-election violence which left 1,200 dead.

    The election has given many the confidence that recent gains can be sustained.

    "There is a sigh of relief, it's not the nightmare that everyone feared," said Daniel Broby, chief investment officer of frontier fund manager Silk Invest, who holds Kenyan assets.

    Kenyatta won slightly over 50% of the more than 12.3 million votes cast, so avoiding the need for a second round.

    "It was a pretty close shave, but at the end of the day, it's nothing to get too worked up about - the fear was that there would not be a majority," Broby added.

    Kenya is one of only two African countries - along with Nigeria - in the benchmark MSCI frontier stock market index. Kenya is the second-best performer in the index this year, outpacing most other markets and lagging only the United Arab Emirates.

    The stock market is the largest in East Africa and is seen as an investment hub for the region. Foreign participation has been increasing and is now more than 50%.
            
    Stocks rally

    Kenyan stocks rallied 13% this year even before Kenyatta's victory, and have added another 3% this week.

    Popular stocks include East African Breweries, up 23% this year, telecom group Safaricom, also up 23%, and Kenya Commercial Bank, up 40%, all of which offer exposure to the country's booming consumer demand.

    Kenya also has a relatively well-developed local bond market and experts say a planned Eurobond is likely to be popular with investors who have snapped up bonds from other African countries such as Zambia and Nigeria.

    In terms of policy direction, investors say little differentiates Kenyatta from his defeated rival Raila Odinga. They have been further encouraged by the central bank's success in keeping the currency steady.

    "The election result is not likely to lead to a major shift of economic policy," said Graham Stock, strategist at frontier fund manager Insparo. "The currency has been very stable, there is no reason to think that won't continue."

    Economic activity is expected to expand, as businesses initiate projects that were on hold before the election. GDP growth is seen as much as 6% this year.

    Investors have been reassured by a reduction in political risk since the introduction of a new constitution in 2010, which included the reform of the judiciary and plans for a devolved system of government.

    Market less bullish
            
    But bond investors are less bullish, noting that Kenyan debt has already enjoyed a strong rally.

    "A year ago when 10-year yields were close to 20% it was attractive but now it's down to 9% the yield is not compelling, especially with political uncertainty hanging over,'' said Stuart Culverhouse, chief economist at broker Exotix.

    Investors point to two sources of uncertainty - Odinga's challenge to the election result, and the International Criminal Court's indictment of Kenyatta.

    Odinga's Coalition for Reforms and Democracy plans to seek the nullification of the election result on grounds that Kenyatta's votes had been increased illegally.

    The risk is of subsequent violence should Odinga lose the case, which may be heard in the Supreme Court in the next couple of weeks. That stirs memories of December 2007 when President Mwai Kibaki was declared the winner, but Odinga said the vote was rigged.

    Riots in early 2008 plunged Kenya into weeks of tribal bloodshed, scaring off investment. Under a power-sharing deal brokered to end the violence, Odinga became prime minister.

    "It's a very fine line for Odinga to tread, the example from 2008 shows how dangerous it can be," said Stock.

    Meanwhile, Kenyatta and his running mate, William Ruto, have been charged by the ICC over their alleged role in the blood-letting five years ago. They deny the accusations and say they will cooperate with investigations. The trial is due to start in July.

    The United States and other Western powers, big donors to Kenya, said before last week's election that a Kenyatta win would complicate diplomatic ties with a regional ally in the battle against militant Islam.

    The election result is "a relative negative outcome for Kenya's international relations," analysts at Renaissance Capital said.

    Ratings agency Fitch, which rates Kenya at sub-investment grade of B-plus with a stable outlook, also said "a political vacuum that delays reform could develop, should the president and deputy president face a lengthy trial."

    Renaissance added, however, that Kenya's dependence on aid was small, so any suspension if Kenyatta were found guilty would have limited impact.

    And those keen to buy Kenya's assets, such as David Mcilroy, chief investment officer of Alquity, are prepared to take the risks.

    "The international community will take a pragmatic approach," he said. "I imagine the trial will take some time - we can park that for now."

    You May Like

    Hope Remains for Rio Olympic Games

    Facing a host of problems, Rio prepares for holding the games but experts say some risks, like Zika, may not be as grave as initially thought

    IS Use of Social Media to Recruit, Radicalize Still a Top Threat to US

    Despite military gains against IS in Iraq and Syria, their internet propaganda still commands an audience; US officials see 'the most complex challenge that the federal government and industry face'

    ‘Time Is Now’ to Save Africa’s Animals From Poachers, Activist Says

    During Zimbabwe visit, African Wildlife Foundation President Kaddu Sebunya says poaching hurts Africa as slave trade once did

    This forum has been closed.
    Comments
         
    There are no comments in this forum. Be first and add one

    By the Numbers

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Ivorian Chocolate Makers Promote Locally-made Chocolatei
    X
    July 29, 2016 4:02 PM
    Ivory Coast is the world's top producer of cocoa but hardly any of it is processed into chocolate there. Instead, the cocoa is sent abroad to chocolate makers in Europe and elsewhere. This is a general problem throughout Africa – massive exports of raw materials but few finished goods. As Emilie Iob reports from Abidjan, several Ivorian entrepreneurs are working to change that formula - 100 percent Ivorian chocolate bar at a time.
    Video

    Video Ivorian Chocolate Makers Promote Locally-made Chocolate

    Ivory Coast is the world's top producer of cocoa but hardly any of it is processed into chocolate there. Instead, the cocoa is sent abroad to chocolate makers in Europe and elsewhere. This is a general problem throughout Africa – massive exports of raw materials but few finished goods. As Emilie Iob reports from Abidjan, several Ivorian entrepreneurs are working to change that formula - 100 percent Ivorian chocolate bar at a time.
    Video

    Video Tesla Opens Battery-Producing Gigafactory

    Two years after starting to produce electric cars, U.S. car maker Tesla Motors has opened the first part of its huge battery manufacturing plant, which will eventually cover more than a square kilometer. Situated close to Reno, Nevada, the so-called Gigafactory will eventually produce more lithium-ion batteries than were made worldwide in 2013. VOA's George Putic reports.
    Video

    Video Polio-affected Afghan Student Fulfilling Her Dreams in America

    Afghanistan is one of only two countries in the world where children still get infected by polio. The other is Pakistan. Mahbooba Akhtarzada who is from Afghanistan, was disabled by polio, but has managed to overcome the obstacles caused by this crippling disease. VOA's Zheela Nasari caught up with Akhtarzada and brings us this report narrated by Bronwyn Benito.
    Video

    Video Hillary Clinton Promises to Build a 'Better Tomorrow'

    Democratic presidential candidate Hillary Clinton urged voters Thursday not to give in to the politics of fear. She vowed to unite the country and move it forward if elected in November. Clinton formally accepted the Democratic Party's nomination at its national convention in Philadelphia. VOA national correspondent Jim Malone has more.
    Video

    Video Trump Tones Down Praise for Russia

    Republican presidential candidate Donald Trump is toning down his compliments for Russia and Vladimir Putin as such rhetoric got him in trouble recently. After calling on Russia to find 30.000 missing emails from rival Hillary Clinton, Trump told reporters he doesn't know Putin and never called him a great leader, just one who's better than President Barack Obama. Putin has welcomed Trump's overtures, but, as Zlatica Hoke reports, ordinary Russians say they are not putting much faith in Trump.
    Video

    Video Uganda Unveils its First Solar-powered Bus

    A solar-powered bus described by its Ugandan makers as the first in Africa has made its public debut. Kiira Motors' electric bus, Kayoola, displayed recently at a stadium in Uganda's capital. From Kampala, Maurice Magorane filed this report narrated by Salem Solomon.
    Video

    Video Silicon Valley: More Than A Place, It's a Culture

    Silicon Valley is a technology powerhouse and a place that companies such as Google, Facebook and Apple call home. It is a region in northern California that stretches from San Francisco to San Jose. But, more than that, it's known for its startup culture. VOA's Elizabeth Lee went inside one company to find out what it's like to work in a startup.
    Video

    Video Immigrant Delegate Marvels at Democratic Process

    It’s been a bitter and divisive election season – but first time Indian-American delegate Dr. Shashi Gupta headed to the Democratic National Convention with a sense of hope. VOA’s Katherine Gypson followed this immigrant with the love of U.S. politics all the way to Philadelphia.
    Video

    Video Dutch Entrepreneurs Turn Rainwater Into Beer

    June has been recorded as one of the wettest months in more than a century in many parts of Europe. To a group of entrepreneurs in Amsterdam the rain came as a blessing, as they used the extra water to brew beer. Serginho Roosblad has more to the story.
    Video

    Video Commerce Thrives on US-Mexico Border

    At the Democratic Convention in Philadelphia this week, the party’s presumptive presidential nominee, Hillary Clinton, is expected to attack proposals made by her opponent, Republican presidential nominee Donald Trump, to build a wall along the U.S.-Mexico border. Last Friday, President Barack Obama hosted his Mexican counterpart, President Enrique Peña Nieto, to underscore the good relations between the two countries. VOA’s Greg Flakus reports from Tucson.
    Video

    Video Film Helps Save Ethiopian Children Thought to be Cursed

    'Omo Child' looks at effort of African man to stop killings of ‘mingi’ children
    Video

    Video London’s Financial Crown at Risk as Rivals Eye Brexit Opportunities

    By most measures, London rivals New York as the only true global financial center. But Britain’s vote to leave the European Union – so-called ‘Brexit’ – means the city could lose its right to sell services tariff-free across the bloc, risking its position as Europe’s financial headquarters. Already some banks have said they may shift operations to the mainland. Henry Ridgwell reports from London.

    Special Report

    Adrift The Invisible African Diaspora