World's biggest asset manager sees opportunity in Kenyan stocks
TLDR
- Kenyan stocks undergo remarkable transformation, from worst to best performers, with 48% surge in Nairobi All-Share stock index.
- President William Ruto's government sees positive economic changes, including deceleration in inflation, shilling appreciation, and narrowing fiscal deficit to 4% of GDP.
- BlackRock Inc. identifies investment opportunities in Kenyan stocks due to significant shifts in fiscal and monetary policy over the past two years.
BlackRock Inc., the world's largest asset manager, sees investment opportunities in Kenyan stocks, which have gone from the world's worst performers in 2023 to the best performers this year. The Nairobi All-Share stock index has surged by 48% when measured in dollars, rebounding from a 43% decline in 2023, where the index reached levels last seen in 2011.
Emily Fletcher, co-manager of the Blackrock Frontiers Investment Trust, attributes this turnaround to changes in the country's economic policy, emphasizing Kenya's significant shifts in both fiscal and monetary policy over the past two years.
Despite facing criticism for soaring prices and increased taxes, President William Ruto's government has seen inflation begin to decelerate, and the shilling has appreciated, making it the best-performing currency globally this year. Kenya’s bonds have also become more attractive as Ruto’s administration narrowed its fiscal deficit to about 4% of GDP and doubled its benchmark interest rate to 13% over the past two years.
Key Takeaways
Kenya stands out as a regional hub and production base for numerous companies, boasting East Africa's largest brewer, mobile phone service provider, and banks listed on its bourse. The recent gains in the market have been predominantly driven by financial firms. Equity Group Holdings Plc, the nation's leading lender by market value, has surged by 71% in dollar terms, while its competitor KCB Group Plc has seen a 64% jump. Safaricom Plc, Kenya's largest mobile phone company, has also advanced by 55%. Remarkably, among the 63-member index, only one stock has experienced a decline this year. The index is currently trading at a price-to-earnings ratio of about 5.5x. In comparison, South African stocks are valued at 11.9x, and Nigerian stocks at 16.6x. South Africa's benchmark stock index has recorded a 6.5% decline in dollar terms, while Nigeria's remains relatively unchanged.
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