The Kenyan stock market is among the best, most reliable, and most regulated stock markets in Africa. But 2023 was definitely not the year for the Kenyan stock market, which raised concern for many foreign investors.
The Kenyan stock market has been struggling in 2023, with the all-share index down 32% year-to-date. This makes it the worst-performing market in the world, according to Bloomberg. Recently, the Nairobi Securities Exchange saw a reduction in foreign investor withdrawal by more than a trillion Kenyan Shilling in the third quarter of 2023. Foreign investors withdrew Ksh 1.18 trillion between July and September 2023, a decrease from the Ksh. 1.5 billion reported in the second quarter of the year. Only two positive inflows have been observed in the past six months. The Capital Markets Authority, however, insists that this points to a promising trend in which international investors are progressively restoring faith in the market.
There are a number of factors contributing to the market’s decline. One is the weakening Kenyan shilling, which has lost 19% of its value against the US dollar this year. This makes Kenyan stocks less attractive to foreign investors. Another factor is concerns about Kenya’s ability to repay its debt. The country has a $2 billion bond coming due in June, and there is uncertainty about how it will be funded. Moreover, Kenya has a large debt burden, and there is uncertainty about how the country will be able to repay it. This has led to concerns about the country’s economic stability and made investors less likely to invest in Kenyan stocks.
The Central Bank of Kenya has been raising interest rates in an effort to control inflation. This is making it more expensive for businesses to borrow money and invest, which is also hurting the stock market.
It is essential to stress that banks in Kenya are carrying a high level of bad loans. This is making it difficult for them to lend money to businesses and consumers, which is hurting the economy. And Kenya is also facing a severe energy crisis, which is disrupting businesses and causing economic uncertainty.
According to CMA, the average market turnover provided by the top five companies by market capitalization, Safaricom Plc, Equity Group Holdings Plc, East African Breweries Ltd, KCB Group Plc., and the cooperative Bank, was 65.41%.
Despite these challenges, some analysts believe that the Kenyan stock market is now undervalued and could be a good investment opportunity for long-term investors. They argue that the country has a number of strengths, such as a young and growing population, a strong tourism sector, and a growing middle class.