Kenyan markets review

In the Kenyan equities market, bullish sentiments prevailed over the past week, with total market turnover declining significantly by 99.20 per cent week-on-week to KES0.10 billion from KES11.65 billion. This decline in turnover was attributed to various factors such as the decisions of the Monetary Policy Committee and the primary bond auction activity. Caleb Mugendi, Investment Manager at Genghis Capital Asset Management in Nairobi, Kenya, provided insights into the market dynamics and the key drivers behind the bullish sentiments in the equities market. One of the major highlights of the week was the decision of the Monetary Policy Committee to maintain the central bank rate at 13 per cent, which was in line with expectations. Additionally, there was a primary bond auction that reopened FXD two-year and three-year 2024, attracting significant investor interest. Investors focused their attention on these instruments, leading to bids exceeding the government's target of 30 billion at attractive rates. As a result, many investors shifted their focus to the fixed income market, impacting market turnover. However, with the expectation of clarity on interest rate movements post the Monetary Policy Committee decision, investors are anticipated to reposition themselves in the market. Despite the positive sentiments in the equities market, the Nairobi Securities Exchange (NSE) witnessed a decline in total market turnover. Factors such as global macroeconomic conditions, including the US jobs report, influenced market sentiment and foreign investor trading activities. The strong job creation data in the US indicated a robust economic performance, potentially affecting the Federal Reserve's rate decisions. Consequently, investors adjusted their expectations, leading to a decline in foreign trading activity. While foreign investor trading decreased by 50%, the overall market turnover dropped by over 80%, reflecting local investors' focus on the central bank rate decision and bond reopens. Local investors are keen on understanding the implications of these decisions on interest rates and government debt as the financial year approaches its end. Despite the decline in turnover, the NSE saw a 1% increase in closing this afternoon, setting the tone for the upcoming week. Caleb Mugendi recommended the banking sector as a favorable trading option due to the prevailing high interest rates and the delay in potential global interest rate reductions. The banking sector is expected to benefit from the elevated interest rates, despite challenges such as declining private sector credit growth and increasing non-performing loans. Many banks have managed to navigate these challenges and report strong earnings growth, with prospects of continued positive performance in the coming months.