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

IS Militants Release 49 Turkish Hostages

Turkey's state-run Anadolu news agency reports that no ransom was paid and no conditions accepted for the hostages' release; few details of the release are known More

Photogallery IS Attacks Send Thousands of Syrian Kurds Fleeing to Turkey

Syrian Observatory for Human Rights says more than 300 Kurdish fighters crossed into Syria from Turkey to defend a Kurdish area from attack by the Islamic militants More

Video Sierra Leone's Ebola Lockdown Continues

Thousands of health workers are going door to door in the West African country of 6 million, informing people of how to avoid Ebola, handing out soap 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.
Fears Ebola Outbreak ‘Beyond Our Capability to Contain’i
X
Jeff Seldin
September 20, 2014 10:28 PM
Each day brings with it new warnings about the deadly Ebola outbreak already blamed for killing more than 2,600 people across West Africa. And while countries and international organizations like the United Nations are starting to come through on promises of help for those most affected, the unprecedented speed with which the virus has spread is raising questions about the international response. VOA's Jeff Seldin has more from Washington.
Video

Video Fears Ebola Outbreak ‘Beyond Our Capability to Contain’

Each day brings with it new warnings about the deadly Ebola outbreak already blamed for killing more than 2,600 people across West Africa. And while countries and international organizations like the United Nations are starting to come through on promises of help for those most affected, the unprecedented speed with which the virus has spread is raising questions about the international response. VOA's Jeff Seldin has more from Washington.
Video

Video Iran, World Powers Seek Progress in Nuclear Talks

Iran and the five permanent members of the U.N. Security Council plus Germany, known as the P5 + 1, have started a new round of talks on Iran's nuclear program. VOA State Department correspondent Pam Dockins reports that as the negotiations take place in New York, a U.S. envoy is questioning Iran's commitment to peaceful nuclear activity.
Video

Video Obama Goes to UN With Islamic State, Ebola on Agenda

President Obama goes to the United Nations General Assembly to rally nations to support a coalition against Islamic State militants in Iraq and Syria. He also will look for nations to back his plan to fight the Ebola virus in West Africa. As VOA White House correspondent Luis Ramirez reports, Obama’s efforts reflect new moves by the U.S. administration to take a leading role in addressing world crises.
Video

Video Migrants Caught in No-Man's Land Called Calais

The deaths of hundreds of migrants in the Mediterranean this week has only recast the spotlight on the perils of reaching Europe. And for those forunate enough to reach a place like Calais, France, only find that their problems aren't over. Lisa Bryant has the story.
Video

Video Westgate Siege Anniversary Brings Back Painful Memories

One year after it happened, the survivors of the terror attack on Nairobi's Westgate Shopping Mall still cannot shake the images of that tragic incident. For VOA, Mohammed Yusuf tells the story of victims still waiting for the answer to the question 'how could this happen?'
Video

Video Militant Assault in Syria Displaces Thousands of Kurds

A major assault by Islamic State militants on Kurds in Syria has sent a wave of new refugees to the Turkish border, where they were stopped by Turkish border security. Turkey is already hosting about 700,000 Syrian refugees who fled the civil war between the government and the opposition. But the government in Ankara has a history of strained relations with Turkey's Kurdish minority. Zlatica Hoke reports Turkey is asking for international help.
Video

Video Whaling Summit Votes to Uphold Ban on Japan Whale Hunt

The International Whaling Commission, meeting in Slovenia, has voted to uphold a court ruling banning Japan from hunting whales in the Antarctic Ocean. Conservationists hailed the ruling as a victory, but Tokyo says it will submit revised plans for a whale hunt in 2015. Henry Ridgwell reports from London.
Video

Video A Dinosaur Fit for Land and Water

Residents and tourists in Washington D.C. can now examine a life-size replica of an unusual dinosaur that lived almost a hundred million years ago in northern Africa. Scientists say studying the behemoth named Spinosaurus helps them better understand how some prehistoric animals adapted to life on land and in water. The Spinosaurus replica is on display at the National Geographic museum. VOA’s George Putic has more.
Video

Video Iraqi Kurdistan Church Helps Christian Children Cope find shelter in churches in the Kurdish capital, Irbil

In the past six weeks, tens of thousands of Iraqi Christians have been forced to flee their homes by Islamic State militants and find shelter in churches in the Kurdish capital, Irbil. Despite U.S. airstrikes in the region, the prospect of people returning home is still very low and concerns are starting to grow over the impact this is having on the displaced youth. Sebastian Meyer reports from Irbil on how one church is coping.


Carnage and mayhem are part of daily life in northern Nigeria, the result of a terror campaign by the Islamist group Boko Haram. Fears are growing that Nigeria’s government may not know how to counter it, and may be making things worse. More

AppleAndroid