Kenya’s equities market rallies on Eurobond buy back sentiment

Kenya's equities and fixed income market is expected to maintain its appeal as the country's Eurobond reaches maturity in 2024. CNBC Africa recently interviewed Wesley Mananmbo, Equities, & Fixed Incomes Analyst at Genghis Capital Investment Bank, to gain insights into the current market sentiment. Mananmbo highlighted the supply and demand dynamics in the market, noting that despite consistent supply from companies like Safaricom, banking stocks, and EABL, local investors have shown apathy, leading to pricing remaining depressed. The discussion also touched on the impact of global factors such as rising rates in the U.S. on investor appetite for frontier markets like Kenya. Mananmbo explained that as developed markets become more attractive, foreign investors tend to repatriate their capital, affecting pricing on the Nairobi Securities Exchange. However, he pointed out that this situation presents an opportunity for investors to enter the market at attractive levels and potentially benefit from capital gains when foreign flows return. The conversation then shifted to local investor participation in the market, with Mananmbo noting the heavy reliance on foreign investors due to factors like the lack of financial muscle and investment education among local retail players. Despite efforts to promote innovative products in the market, such as investing with bonga points, local participation remains limited, while foreign participation is expected to drive a recovery, especially in battlefront stocks. The interview also delved into the implications of Kenya's Eurobond buyback deal on the market. While the equity market is anticipated to remain attractive, the fixed income segment, particularly the Eurobond, may experience some impact depending on how credit rating agencies view the buyback. However, the overall outlook for the market remains positive, with foreign investors likely to seize opportunities presented by discounted positions. The conversation concluded with a focus on Safaricom, one of the key players in the market. Mananmbo discussed the recent appointment of a new board member and the potential implications for investor sentiment, particularly in light of the company's expansion into Ethiopia. Despite some short-term risks, Mananmbo advised investors to take a long-term view and capitalize on the current market conditions for quality stocks like Safaricom, banking stocks, and EABL. By staying invested for the long term, investors can potentially unlock significant gains as market conditions improve.