IFB segment claims top spot: 50.12% of high-value trades
Bond turnover surged by 25.15 per cent, reaching KES 1.24 billion, with the Infrastructure (IFB) segment emerging as the highest-grossing. Arnold Midungá, CEO of Blackbow Consult Ltd joins CNBC Africa to unpack the heightened activity in the IFB segment, particularly the IFB1/2024/8.5.
Tue, 06 Aug 2024 14:34:44 GMT
Disclaimer: The following content is generated automatically by a GPT AI and may not be accurate. To verify the details, please watch the video
AI Generated Summary
- Attractive returns and interest-free investments are driving investor interest in the Infrastructure Bond segment.
- Government's debt management strategy has played a key role in curbing inflation and attracting foreign currency investments.
- Kenyan bond market outperforms other emerging markets in the region, offering significant gains to investors and robust trading volumes.
The Kenyan bond market has seen a surge in turnover by 25.15%, reaching KES 1.24 billion, with the Infrastructure (IFB) segment emerging as the top performer. Arnold Midungá, financial analyst and CEO of Blackbow Consult Ltd, recently discussed the heightened activity in the IFB segment, particularly focusing on the Infrastructure Bond No. 1 issued in 2024 with a maturity of 8.5 years.
Midungá highlighted the attractive returns of about 17% per annum and the interest-free nature of investments as key factors driving investor interest in the IFB segment. These factors have led to a significant influx of investors into the infrastructure bond issued in 2024.
Moreover, Midungá noted the positive impact of the government's debt management strategy on curbing inflation. The issuance of various types of bonds, including infrastructure bonds, has attracted foreign currency investments, strengthening the Kenyan shilling and promising good returns for investors. The performance of the secondary market has been robust, with increased interest rates encouraging active trading among investors.
In the first half of the fiscal year, bond holders realized a profit of 14 billion shillings from trading on the secondary market of the Nairobi Securities Exchange. High prices on infrastructure bonds have driven demand and contributed to the market's success. The 17% yield on the bonds has incentivized investors to continuously monitor and trade within the market.
The Kenyan bond market's performance has been noteworthy compared to other emerging markets in the region. Despite a challenging period last year, the market has experienced significant growth, with a 50% increase in market capitalization. This growth can be attributed to government initiatives to control inflation, offering attractive returns on bonds both in the primary and secondary markets.
According to Midungá, Kenya has outperformed countries like South Africa and Egypt in terms of gains to investors, trading volumes, and overall market performance. The bond market's adaptability and tradability of long-term papers have contributed to its success, making it a favorable investment opportunity for both retail and institutional investors.
Looking ahead, the Kenyan bond market is positioned for continued growth and success, with the Infrastructure Bond segment leading the way in high-value trades and investor satisfaction.