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

Nigeria Incumbent in Tight Spot as Poll Nears

Muhammadu Buhari is running a strong challenge to Goodluck Jonathan, amid a faltering economy and Boko Haram security worries More

Video Liberia's Almost-Last Ebola Patient Grateful but Still Grieving

Beatrice Yardolo tells VOA that despite her fame, life is still a struggle as she waits for government's promise of support to arrive More

Video Cambodian Land Grabs Threaten Traditional Communities

At least seven different indigenous groups in Ratanakiri depend mainly on forest products for their survival, say they face loss of their land, traditional way of life More

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

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Liberia's Almost Last Ebola Patient Grateful but Still Grievingi
X
Benno Muchler
March 26, 2015 3:41 PM
Beatrice Yardolo was to make history as Liberia’s last Ebola patient. Liberians recently started counting down 42 days, the period that has to go by without a single new infection until the World Health Organization can declare a country Ebola-free. That countdown stopped on March 20 when there was another new case of Ebola, making Yardolo’s story a reminder that Ebola is far from over. Benno Muchler reports from Monrovia.
Video

Video Liberia's Almost Last Ebola Patient Grateful but Still Grieving

Beatrice Yardolo was to make history as Liberia’s last Ebola patient. Liberians recently started counting down 42 days, the period that has to go by without a single new infection until the World Health Organization can declare a country Ebola-free. That countdown stopped on March 20 when there was another new case of Ebola, making Yardolo’s story a reminder that Ebola is far from over. Benno Muchler reports from Monrovia.
Video

Video Cambodian Land Grabs Threaten Traditional Communities

Indigenous communities in Cambodia's Ratanakiri province say the government’s economic land concession policy is taking away their land and traditional way of life, making many fear that their identity will soon be lost. Local authorities, though, have denied this is the case. VOA's Say Mony went to investigate and filed this report, narrated by Colin Lovett.
Video

Video US, South Korea Conduct Joint Military Exercises

The Eighth U.S. Army Division and the Eighth Republic of Korea Mechanized Infantry Division put on a well orchestrated show of force for the media this week during their joint military training exercises in South Korea. VOA’s Seoul correspondent Brian Padden was there and reports the soldiers were well disciplined both in conducting a complex live fire exercise and in staying on message with the press.
Video

Video Space Program Status Disappoints 'Last Man on the Moon'

One of the films that drew big crowds last week at the annual South by Southwest festival in Austin, Texas, tells the story of the last human being to stand on the moon, U.S. astronaut Eugene Cernan. It has been 42 years since Cernan returned from the moon and he laments that no one else has gone there since. VOA’s Greg Flakus reports.
Video

Video Young Filmmakers Shine Spotlight on Giving Back

A group of student filmmakers from across the United States joined President Barack Obama at the White House this month for the second annual White House Student Film Festival. Fifteen short films were officially selected from more than 1,500 entries by students aged 6 through 18. The filmmakers and their families then joined the president and a group of celebrities for a screening of their films. VOA’s Julie Taboh reports.
Video

Video VOA Exclusive: Interview with Afghan President Ashraf Ghani

Afghan President Ashraf Ghani, during his first visit as president to Washington, gave a one-on-one interview with VOA Afghan Service reporter Said Suleiman Ashna, about his request for a change in U.S. troop levels, the threat from the Islamic State, and repairing relations with the United States and Pakistan. The interview was held at Blair House, late Sunday, in Pashto.
Video

Video California Science Center Tells Story of Dead Sea Scrolls

The ancient manuscripts were uncovered in the mid-20th century, and they are still yielding clues about life and religious beliefs in ancient Israel. As VOA's Mike O'Sullivan reports, an exhibit in Los Angeles shows how modern science is bringing the history of these ancient documents to life.
Video

Video Angelina Jolie Takes Another Bold Step

Hollywood actress and filmmaker Angelina Jolie has revealed she had her ovaries and fallopian tubes removed to lower her odds of getting cancer. Doctors say the huge publicity over her decision will help raise awareness about the importance of cancer screening. VOA’s George Putic has more

All About America

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More