Kenya rated second to Nigeria in frontier investors’ survey

Nearly half of international fund managers and investment bankers see Kenya as a top frontier investment market only second to Nigeria in Africa.

A survey of 158 international investors conducted by the Economist Intelligence Unit (EUI) showed that 76 of them believed that Kenya offered the best prospects for institutional investors over the next five years, compared to 81 per cent who said Nigeria was better.

The survey is set to attract renewed international investor interest critical to faster growth of the economy and recovery of the stock market, especially coming in the wake of massive sell offs last year when equities shed 28 per cent of their aggregate value.

“This is extremely good news for Africa as a strong capital flow should feed a virtual cycle of job creation, income rises and more investment,” said Nazem Al Kudsi, chief executive of Abu Dhabi-based Invest AD, which manages funds investing in Africa and the Middle East.

“Institutional investors are recognizing an Africa that is better-governed, is less dependent on resource extraction, and is increasingly dominated by middle class expectations,” he said.

The survey by EIU showed a shift to long-term investment strategies from more speculative and short-term bets, with a third of the respodents saying their allocation to Africa will be at least five per cent of their portfolio.

Local fund managers have attributed the growing interest to the emerging middle income class that is offering a ready market for new products, including financial services, consumer goods, property and energy.

Edward Gitahi, a senior investment manager at PineBridge Investments, said there is demand for goods and services in the Kenyan market, making a case for international investors seeking profitable ventures.

“There are profit-making opportunities in the market presented by ready demand for goods and services, and this is what investors are looking for,” said Mr Gitahi.The diversity of the Kenyan economy provides a variety for investors seeking to spread their risk.

Energy, communication and banking services sectors, he said, were recording a growing demand which perhaps explains why foreign investor interest has traditionally been biased to listed companies operating in the respective sectors.

Shares of KCB, Equity Bank and Safaricom have been highly sought-after by international investors, who account for over two-thirds of turnover at the NSE on average.

Results of the poll indicate that foreign investors could troop back in bigger numbers to the NSE to lift its overall performance as prospects in the US and Europe remain depressed.