Kenya markets outlook 2024

Kenyan markets have experienced a rollercoaster ride in 2023, with a surge followed by turbulent times, especially with the shilling depreciating against the dollar. The market witnessed a significant sell-off, closing at multi-year lows. While the Kenyan stocks began to recover in week one, the US markets were on a selling spree before bouncing back in week two. However, as markets entered week three, there was a slowdown due to a public holiday, Martin Luther King Jr. Day, impacting trading activity. The increased interest rates by 2 percentage points to a record of 12.5 per cent by the Monetary Policy Committee have posed challenges for the Kenyan market. This significant rate hike has heightened the cost of capital, making borrowing expensive and leading to a surge in non-performing loans (NPLs). Major banks like KCB have been downgraded, signaling a tough outlook for the banking sector. Consequently, borrowing has decreased, impacting consumer demand and purchasing power. The weakening shilling against the dollar has compounded the situation, hitting an all-time low of 160. Investor sentiments reflect a growing preference for foreign investments, particularly dollar-based ventures. With the Kenyan shilling's ongoing depreciation, local investments have underperformed, prompting a shift towards external opportunities. Key highlights include the rising interest in assets like Bitcoin and US tech stocks, such as Nvidia, Tesla, Google, and Microsoft, which have been performing well. Fintech platforms have facilitated capital flight as investors seek profitable ventures abroad. Looking ahead to 2024, the focus remains on global economic and political scenarios. The US election year in November and potential policy changes under the Biden administration are key factors influencing market dynamics. Speculations of a rate cut by the Fed in March are gaining traction, offering prospects of cheaper capital and market support. The current Fed rate, at a multi-year high, is attracting capital from other markets, particularly offering good returns for bond investors. Inflationary pressures and high bond yields in some economies are redirecting investments towards US bonds, showcasing the appeal of the market's performance. The increasing trend of capital migration to the US for better returns has spurred investor interest, setting the tone for potential market trends in the coming months.