Kenyan bourse shrugs off unresponsiveness to record earnings & dividends

The Kenyan stock market has recently seen a wave of dividend announcements and record earnings, but the excitement among investors seems to be lacking. Despite the attractive returns on offer, share prices have been experiencing muted growth. In a recent interview with CNBC Africa, Senior Equities Analyst at Genghis Capital, Kevin Ngige, shed light on the factors contributing to the lackluster performance of the market. One of the key issues affecting the market is the significant capital flight that occurs during periods of global uncertainty. Ngige pointed out that Nairobi Securities Exchange is heavily reliant on foreign investments, with around 85-86% of the market being foreign-driven. When global events, such as the conflict between Ukraine and Russia, trigger capital flight from riskier markets to safer ones, the Kenyan market takes a hit. The all-share index, which is influenced by a handful of blue-chip stocks that are popular among foreign investors, has been impacted by this trend. "Foreigners are mostly interested in blue chips like Safaricom, BAT, and top banks, and when they start pulling out capital, it affects the overall performance of the market," Ngige explained. The upcoming election in Kenya is also adding a layer of uncertainty for investors. Ngige highlighted that the political environment, coupled with the possibility of a regime change, is making investors cautious. This caution is reflected in the subdued response to positive announcements by companies like KCB and Equity, which recently reported strong financial results and expansion plans. While these companies have made strategic moves to enter new markets like Tanzania and the DRC, the market sentiment remains tepid due to the looming election and potential post-election unrest. The lack of enthusiasm from local investors is another challenge facing the Kenyan stock market. Despite efforts by the Nairobi Securities Exchange to attract more local participation through initiatives like day trading and incubation programs for new companies, the market has not seen an IPO in nearly six years. Ngige emphasized the need for regulators to make trading more accessible and efficient to encourage greater local involvement. He suggested that lowering fees and streamlining the trading process could help revitalize the market and attract a new breed of investors. In the current uncertain climate, Ngige also addressed the issue of share buybacks among blue-chip companies. While share buybacks could provide a buffer against market volatility, he believes that most companies are likely to prioritize building a financial cushion in the face of ongoing geopolitical risks and economic uncertainties. Overall, the Kenyan stock market faces challenges despite the strong financial performance of key companies. Investors are treading cautiously amidst global turmoil, political transitions, and the need for regulatory reforms to stimulate local participation. As the market navigates these hurdles, the resilience and adaptability of businesses and investors will be crucial in shaping its future.