The stock market offered investors the highest returns for a second year in a row in 2025, beating property, offshore investments and fixed income assets, whose returns dipped due to falling interest rates.
Investor wealth at the Nairobi Securities Exchange (NSE) rose 50 percent or Sh972.7 billion to Sh2.91 trillion between January 1 and December 19, eclipsing the gain of Sh495 billion or 34.4 percent the bourse offered investors in 2024.
Treasury bonds auctioned this year paid coupons or interest rates of between 11.67 percent and 14.63 percent. Treasury bill interest rates fell to a range of 7.7 percent to 9.23 percent in December, from a range of 9.8 percent to 11.4 percent at the beginning of the year.
Those investors who opted to keep their cash in fixed deposit accounts in commercial banks earned returns of between 7.5 percent and 10 percent this year, while those holding dollars as an investment asset had a flat return as the greenback traded within a tight range of Sh128.94 to Sh129.96 this year.
In the property sector, the latest data shows, house sale prices in Nairobi suburbs and satellite towns increased by 8.2 percent in the year to September, rental prices by 1.3 percent and land sale prices by an average of 6.4 percent in the period.
For the stock market, the gains were backed by improved macroeconomic conditions such as low inflation, lower interest rates and a stable exchange rate, which supported consumer demand in the economy and gave investors optimism about the financial performance of listed companies.
“We have now had two consecutive years of positive returns at the NSE, but in 2025, the gains were broader across the different segments of the market. Notably, the performance was driven by local investors. Foreign investors reduced the volumes of net sales in their portfolios,” said Ronnie Chokaa, a senior research analyst at Capital A Investment Bank.
Large blue chips have contributed to the bulk of valuation gains at the market, led by Safaricom, whose share price has gone up 65 percent to Sh28.20 in the year to date, raising the telco’s market cap by Sh446.7 billion to Sh1.13 trillion.
EABL has recorded a 64.5 percent or Sh89 billion growth in its market cap to Sh228.3 billion this year. The brewer’s share price rose by 24 percent last week following the announcement that its British majority owner, Diageo Plc, is selling its 65 percent stake to Japanese beverage maker Asahi Holdings for a consideration of $2.354 billion (Sh303.5 billion).
Banking stocks have also had a positive year, where share prices of 10 out of the 11 listed counters have gone up by double digits, led by HF Group at 120 percent, NCBA Group at 84.5 percent and DTB at 65.2 percent.
In terms of absolute market cap gains, the leading bank is NCBA at Sh67.2 billion to Sh146.6 billion, KCB Group at Sh66.4 billion or 49.6 percent to Sh200 billion and Equity Group at Sh53.6 billion or 29.4 percent to Sh235.9 billion.
While the equities market is tipped to maintain its position as the most profitable investment option in the local market in the short term, political and global headwinds pose a downside risk down the road.
“The expectation is that the market will maintain its positive momentum in the coming quarters, until the election cycle sets in,” added Mr Chokaa.
A key watch will be the behaviour of foreign investors, whose participation in the local market has dipped compared to historical averages. This year, their share of monthly traded turnover has ranged between 28 percent and 59 percent, down from a range of 35 percent and 76 percent in 2024.
In the 11 months to November, foreigners had made net sales of Sh12.2 billion at the NSE, and were on track to cut their exit volumes from the Sh19.5 billion recorded in 2024.
Higher blue-chip prices encouraged the sales, plus a stable shilling to the dollar, which spared them from exchange losses when exiting from stocks.
The pace of rate cuts in the US, the EU, and the UK in the coming year will, however, determine the level of capital flows into emerging and frontier markets like Kenya.
In 2025, the US Federal Reserve made three rate cuts by a cumulative 75 basis points, bringing its policy rate to a range between 3.5-3.75 percent.
Expectations are that the Fed might go slow on the cuts next year, owing to a softening jobs market and inflation that remains elevated above the US central bank’s two percent long-term target.
Smaller markets have been banking on the US rate cuts to encourage capital flows out of the world’s largest economy, meaning that a pause would potentially dampen foreign investor flows.
“Major global economies have reached their cycle peaks regarding rate cuts, our underwhelming fiscal consolidation efforts and uncertainty in the oil markets (inflationary), all point to tempered markets,” said Rufus Mwanyasi, Managing Director at Canaan Capital.
For the fixed income market, the Central Bank of Kenya’s (CBK) monetary easing actions have resulted in interest rates falling further from the highs seen in early 2024.
The CBK has cut its base rate in each of the last nine Monetary Policy Committee (MPC) meetings held since August 2024. In its most recent sitting on December 9, the MPC cut its rate by 25 basis points to nine percent, bringing the cumulative cuts since August 2024 to four percentage points.
Investors in bonds, Treasury bills, unit trusts, and fixed cash deposits in banks have thus seen their returns fall sharply over the period in line with the CBK signal.
Bonds issued this year—the majority of them being reopenings from past issuances—are paying investors annual interest of between 11.67 percent and 14.63 percent. Last year, the returns from bonds peaked at 18.46 percent, which was available on an 8.5-year infrastructure bond sold in February 2024.
In the secondary market at the NSE, bond prices rose as yields fell, rewarding sellers of infrastructure bonds with returns of up to 22 percent as they demanded a premium to let go of their high-paying paper.
In the T-bills market, rates peaked at 16.99 percent last year on the one-year paper, but have since then come down to a range of 7.7 percent on the 91-day T-bill to 9.23 percent for the 364-day paper, in line with the cuts in the central bank rate.
Retail investors’ exposure to bonds remains high, with the latest CBK data showing that households have invested Sh443.4 billion in government securities, equivalent to 6.5 percent of the State’s domestic debt of Sh6.82 trillion.
At the end of June 2025, they held Sh409.3 billion of domestic debt, the CBK numbers show. Purchase of bonds through the CBK’s digital platform, DhowCSD, has made it easier for investors to buy the government paper electronically.
A lower CBR has also meant that banks have cut the rates they are offering their customers for long-term fixed deposits. By the end of October, lenders were paying an average annual interest rate of 7.5 percent for the term deposits, down from 10.05 percent in January 2025.
Banks have cut the fixed deposit returns in order to protect their margins, as the rates they charge on loans also come down.
Investors in unit trusts have seen their annualised rates come down, in line with the rates on underlying assets such as T-bills and cash deposits.
Money market funds, which account for 59 percent of the collective investment schemes’ Sh679.6 billion assets under management, are now paying between 4.54 percent and 11.94 percent in annual rates, compared to 4.97 percent and 16.84 percent in January.
Similar to bonds, the appetite for the unit trust products has gone up significantly in the last three years, with the sector assets under management rising fourfold to the current Sh679.6 billion from Sh161 billion in December 2022.
In the property sector, returns remained in the single digits for house sales, rent and land sales in Nairobi in the year to September 2025.
As per data provided by realtors HassConsult, the slowest returns were on the rental market, where prices declined by 1.6 percent in the third quarter of the year and 1.3 percent over one year, on falling demand in higher-end estates that are preferred by expatriate workers.
“Rental prices, which fell by 1.3 per cent over the year, are being driven by changes in the detached house market, where the ending of large aid flows into the country has prompted expatriate departures that have reduced demand for rented detached houses,” said HassConsult in its property index report for September 2025.
For home sellers, prices rose by 8.2 percent in the one year, driven by scattered spots of demand for detached houses in areas such as Runda, Ridgeways, Loresho, Lavington, Karen, and Muthaiga in the suburbs, and in Athi River, Ruiru, Tigoni, Juja, and Kiserian in the satellite towns.
In the city’s suburbs, land prices rose by 6.27 percent to Sh223.9 million per acre, while satellite town land prices rose by an average of 6.56 percent to Sh32.3 million per acre in the year to September.
