Kenya’s stock market faces more investment hurdles after Morgan Stanley Capital International (MSCI) dropped its listed firms from the latest MSCI Equity Index for frontier markets, signalling the increasing unattractiveness of the Kenyan economy to foreign investment.
The American investment advisory firm excluded the Nairobi Securities Exchange (NSE)-listed firms from its key index for the second time in three months as Kenya’s investment environment continues to deteriorate as a result of unpredictable taxation regime, dollar shortage, weakening currency and high cost of fuel which continue to exert pressure on the cost of living.
The index influences the investment decisions of foreign investors in emerging and frontier markets.
Kenya has been lumped together with Bangladesh, Egypt, and Nigeria whose stocks have been blacklisted by the New-York based advisory firm.
“In light of currently observed market accessibility issues, MSCI will not implement changes as part of this Index Review for any securities classified in Bangladesh, Egypt, Kenya, or Nigeria for the MSCI Bangladesh, MSCI Egypt, MSCI Kenya, and MSCI Nigeria Indexes or impacted composite indexes,” MSCI said in a statement dated November 14.
However, firms on the Sri Lankan stock market have been reinstated in the MSCI Equity index following improvements in the trading environment.
“... liquidity in the Sri Lankan foreign exchange market has improved and no longer impacts the ability of foreign investors to repatriate capital from the Sri Lankan equity market, MSCI will resume the implementation of index review changes,” said MSCI.
In June this year MSCI dropped Kenyan-listed firms together with those in Nigeria, Egypt, Sri Lanka and Bangladesh from its quarterly index reviews over poor investment climate.
MSCI evaluates equity markets around the world each year to determine whether they should be classified as a developed, emerging, and frontier or standalone market.