Securities traders at the NSE. Capital markets players, particularly stock exchanges and regulators, are critical in driving the global shift towards sustainability.
The Nairobi Securities Exchange (NSE) outperformed peer African markets in dollar denominated returns in 2024, helped by the strengthening of the shilling against the US currency at a time when other African currencies depreciated.
A review of the 10 African stock markets covered by the Morgan Stanley Capital International (MSCI) emerging and frontier market indices shows that the NSE led with a return of 65.3 percent, well ahead of Côte d'Ivoire (34.9 percent), Mauritius (26.3 percent), Senegal (25.1 percent) and Morocco (16.2 percent).
Tunisia and South Africa’s bourses returned single digit gains of 3.9 percent and 3.8 percent respectively, while there were negative returns for investors in Nigeria (-67.7 percent), Egypt (-32.4 percent) and Zimbabwe (-3.6 percent).
These performances largely reflected the fortunes of the countries respective currencies against the dollar, where the shilling was the top performer with a gain of 21 percent, while the Nigerian naira and Egyptian pound were devalued sharply during the year by 74.8 percent and 64.5 percent respectively.
Among the other countries, local currencies depreciated by between one percent and nine percent against the dollar in 2024.
Foreign investors normally exchange their dollars for shillings (or local currencies in the case of the other countries) when entering the local market and buy back dollars for repatriation upon selling their shares.
An appreciating shilling therefore gives them an exchange gain when valuing their returns—given that they get more dollars for every shilling when exiting compared to their entry cost.
In case of a depreciating local currency, they would get fewer dollars for repatriation.
This exchange rate is therefore a key consideration for foreign investors, given that it can either boost or diminish their true returns when compared to local currency returns.
For the NSE, the appreciation of the shilling handed dollar investors a significantly higher annual return compared to the market’s shilling denominated returns.
The NSE recorded a 34.8 percent or Sh500.7 billion jump in investor wealth to Sh1.9 trillion in 2024, while the NSE 20 Share Index was up by 33.9 percent to 2,010.65 points.
There are 11 Kenyan stocks included on the MSCI frontier and small caps indices. Safaricom, Equity Group, EABL, KCB Group and Co-operative Bank of Kenya are listed on the MSCI frontier markets index, while BAT Kenya, KenGen, Kenya Re and DTB Group, Carbacid and Bamburi Cement are on the MSCI frontier markets small cap index.
With the exception of BAT Kenya and Kenya Re, the companies on these indices had double digit percentage share price gains of between 22 and 90 percent in the year.
BAT shed 7.7 percent to end the year at Sh360 per share, while Kenya Re was down by 32 percent to Sh1.28 after the company’s share price adjusted downwards to accommodate a bonus issue of one share for each held.
The year marked a turnaround for the Kenya market on the MSCI listing, having started the period under a review freeze due to a dollar supply hitch in the local forex market, which made it difficult for foreign investors to repatriate their profits abroad.
The MSCI had frozen reviews of its Kenyan index in August 2022 due the forex crisis, effectively stopping the introduction or removal of constituent companies and adjustments on their weighting within the index.
The reviews are meant to give investors an up-to-date picture of the state of an exchange, allowing them to make informed investment decisions. The freeze was lifted in May this year after the forex market stabilised, with the number of companies listed going up from four to 11.
