One of the world’s largest asset management firms BlackRock has made an investment on the Nairobi Securities Exchange (NSE) after a four-year break in a major win for the Kenyan bourse that is emerging from its worst year in history.
Kamau Thugge, the Central Bank of Kenya (CBK) governor, revealed in a meeting with bankers last week that he met representatives from the American multinational with $9.1 trillion assets under management this month after they picked Kenya among 10 economies they had selected to invest.
“The other day I met BlackRock Asset Managers. They came to my office and wanted to know how the economy was doing and said they had kept away from Africa for the last four years but now they had identified 10 countries globally where they think they can start investing,” Dr Thugge told bankers at an event to celebrate Habil Olaka who has just left the Kenya Bankers Association as CEO.
“Blackrock actually made an investment into the equities and if you are keen and have been looking at what’s happening in the stock market, you can actually start to see it has been going up,” Dr Thugge said at the forum.
This comes at a time when investors at the NSE have witnessed sustained gains in the recent past. An analysis by the Business Daily shows the equities turnover has rebounded from a low of Sh2.6 billion in January to hit Sh4.6 billion in February and Sh4.5 billion so far in March.
The increased activity in equities has coincided with a mini rally that has lifted the NSE to year to date returns of 16.8 percent as at Friday last week.
Dr Thugge says key among the reasons for Blackrock’s appetite for the Kenyan market are the developments being witnessed in the foreign exchange market. The shilling has been on a sustained rally, gaining 16 percent against the US dollar since the start of 2024 following the issuance of the $1.5 billion (Sh198.0 billion) Eurobond whose proceeds financed the partial buyback of the June 2024 $2 billion (Sh264.1 billion) maturity as well as the outsized oversubscription of the debut infrastructure bond issued this year.
According to the apex bank, the volume of foreign exchange transactions accounted for by the interbank market has surged from just seven percent at the start of the year to 32 percent currently, a leap the CBK says is among the key factors that have informed the appreciation of the local unit against major currencies globally.
This revelation comes 11 weeks after the apex bank lowered the minimum amount that banks can trade in the interbank foreign exchange market to $100,000 (Sh13.2 million) from the previous $250,000 (Sh32.9 million) following the launch of an electronic trading platform-- Electronic Matching Systems (EMS)-- designed to boost hard currency supply in the banking system.
Dr Thugge says he met treasurers of banks on Friday last week in a meeting that discussed the interbank foreign exchange market.
“When I came it was five percent, the purchases from clients only five percent was being put into the interbank market. We got together and agreed to what we called ‘the journey to 25 percent’ where now of all the purchases 25 percent would go to the interbank market,” he said.
“As of January, only seven percent was going there. In February it went to 27 percent and now in March it is at 32 percent; so we have already passed that journey to 25 percent.”
Dr Thugge says the country’s foreign exchange market reforms over the last six months were hinged on a plan dubbed ‘the journey to 25’ which targeted reinvigorating the interbank foreign exchange market by increasing the proportion of transactions accounted for by the interbank market to 25 percent.
The CBK boss says when he took office in June last year, the interbank foreign exchange market was dysfunctional.
“I called a meeting of the CEOs and I asked what was going on with the interbank foreign exchange market. They were very frank and said there were all kinds of circulars restricting this… so we decided we were going to remove all those restrictions,” he said.
“The last restriction really was the merging, we used to have a parallel market – the central bank used to quote one rate but the market rate was different somewhere else and we merged that on January 5 this year.”
