Bullish investor confidence ahead of Kenya-U.S $3.6 billion project

In a move to transform the infrastructure landscape of Kenya, President William Ruto recently secured funding for the six-lane Nairobi-Mombasa expressway, totaling KES 472 billion ($3.6 billion). The project, set to be financed through a public-private partnership (PPP), will see investors charging toll fees for approximately 30 years to recoup their investments before transferring ownership to the government. To delve deeper into the implications of this project and the overall bullish investor market sentiment, CNBC Africa spoke with Caleb Mugendi, Investment Manager at Genghis Capital Asset Management in Nairobi. The toll fees mechanism, as discussed by Mugendi, draws parallels to the existing toll road system in Nairobi, where users pay fees based on the distance traveled. With a similar model anticipated for the Nairobi-Mombasa expressway, the 30-year recovery period for the massive investment seems plausible, considering the expected annual returns from toll fees. The recent surge in foreign investor activity in the Kenyan market has been notable, with a 186.5 percent increase week over week, totaling 1.14 billion shillings. This spike can be attributed to positive news from listed companies, particularly in the banking sector. Strong Q1 results from key players like KCB, NCBA, and INM, along with the reinstatement of KCB into the MSCI frontier market index, fueled bullish sentiments among foreign investors. On the domestic front, local investors also showed increased interest, especially as many companies closed their books for dividends. Despite a slight decline in total market turnover the previous week, an uptick was witnessed last week, showcasing the market's resilience and attractiveness to both local and foreign investors. Individual stock performances mirrored the overall market trend, with key players like KCB Group standing out with a 10% increase week on week. Factors such as robust earnings growth and favorable market conditions, including improved foreign exchange availability, have contributed to the positive momentum in the Nairobi Stock Exchange. Looking ahead, market analysts anticipate continued support from both foreign and local investors, driven by ongoing earnings growth and undervalued stock opportunities. The banking sector, in particular, is poised for a strong year ahead, buoyed by high interest rates and promising revenue streams. However, as trading closed on a slightly negative note for the day, attributed to ex-dividend adjustments, experts like Mugendi remain optimistic about the overall market outlook. Such fluctuations are seen as temporary reactions to specific company events and are not indicative of a long-term trend. With a robust infrastructure project on the horizon and continued investor confidence, Kenya's capital market shows promise for sustained growth and development.