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US investors raise Kenya portfolio holdings for first time in 5 years
American investors returned to Kenya in 2024, boosting portfolio holdings for the first time in five years—drawn by high rates and strong stock market yields
American investors raised their portfolio holdings in Kenya for the first time in five years in 2024, lured by high interest rates and attractive yields on the Nairobi stock market.
Investments in equities and debt securities by United States’ investors rose by $3 million (Sh388.5 million) from $1.371 billion (Sh177.5 billion) in 2023 to $1.374 billion (Sh177.9 billion) last year, according to a survey by the US Department of Treasury and the Federal Reserve Board.
The overall portfolio held by American investors in foreign countries generally increased by three percent or $491 billion to hit a three-year high of $18.3 trillion, as interest rates gradually eased in the US and investors sought better returns abroad.
The rare uptick in Kenyan assets held by US investors followed a surge in interest rates and return on securities, coming as the Central Bank of Kenya (CBK) raised its base rate to its highest level in over 12 years, pushing up key interest rates.
Last year, an infrastructure bond with an attractive tax-free coupon rate of 18.46 percent was issued, attracting more foreign investors to the economy after years of decline.
The Nairobi Securities Exchange (NSE) also saw an improvement in performance, with the Nairobi All-Share Index (NASI), which measures the value of all shares in the bourse, rising by 35 percent from 90.45 at the end of 2023 to 121.8 by end of last year.
“The interest rates were so high last year, with the government floating an infrastructure bond at 18 percent interest tax free. That, in itself, registered significant foreign investor interest, majority of which we think was from the US market,” observed Ronny Chokaa, a senior research analyst at Capital A Investment Bank.
“Compared to their local alternatives, in the US, at the time, long-term debt securities were yielding around five percent whereas in Kenya a comparable 10-year bond was yielding 18 percent. So there was a more attractive nominal or real yield in Kenya.”
American investments in Kenya peaked in 2019, just before the pandemic disrupted global investment plans and trends.
In 2020, Americans liquidated about $126 million (Sh16.3 billion) worth of investments they held in Kenya, marking a first downturn in what would turn into a persistent trend for the next four years.
“Once Covid struck, there was a lot of uncertainty and as a result we started seeing increased panic sales by foreign investors as they rushed to safe haven assets back home,” notes Mr Chokaa.
Americans’ investment interest in Kenya also seems to have shifted in favour of long-term debt securities over equities.
Last year, US money invested in Kenyan equities dropped by $18 million (Sh2.3 billion) or 14 percent from $130 million (Sh16.8 billion) to $112 million (Sh14.5 billion) – the lowest level recorded in 15 years, as investors shifted funds to fixed-income instruments.
Conversely, long-term debt securities rose by $20 million (Sh2.6 billion) from $1.341 billion (Sh173.1 billion) in 2023 to $1.361 billion (Sh175.7 billion), marking the second consecutive rise amid a declining appetite for equities.
Until 2018, equities dominated Kenya’s stock of US assets, but long-term debt securities overtook them as the preferred investment asset. They now account for over 99 percent of the US portfolio in the country.
Experts attribute this shift to a prolonged bear market in frontier and emerging markets such as Kenya, coupled with the rising yields in debt securities compared to the returns at home.
