Financial adviser downgrades political risk

An international financial advisory firm has downgraded Kenya’s political risks that were associated with the March 4 General Election and the International Criminal Court trials of President Uhuru Kenyatta and his deputy, William Ruto.

Research and risk analysts at Stratlink Africa had until May continued to express concern that while the bourse would continue to attract foreign interest, this would come with inhibition from the political risk carried by the ICC trials.

However, they have now eased their concerns for the market, and adjusted the risk level downwards for the bourse, which has been one of the top performers in Africa.

“We no longer believe that the pending ICC trials of the Head of State and his deputy pose a threat to Kenya’s equity market performance indicative of a less negative effect on the business environment in Kenya,” said Stratlink in a report released last Wednesday.

“In Kenya we assess equities will continue to be the outperforming asset class of 2013 as fixed income yields are stagnating, some retarding.”

The Stratlink report was also captured by Reuters on Friday last week, which said foreigners are driving the Nairobi bourse.

The NSE 20-Share Index rose 0.1 per cent to 4,984.33 points on Friday.

“Demand was primarily from foreign investors while supply was mixed,” Faith Atiti, an analyst at NIC Securities, told Reuters.

According to the MCSI Emerging markets returns analysis, the Kenyan stock market returns grew by 79.7 per cent in the past one year, only behind Ghana which registered a 99 per cent growth and ahead of Nigeria whose returns went up by 77 per cent.

Going forward, Stratlink expects the resultant positive sentiment from local and international players in the bourse as well as strong economic fundamentals to sustain a bull run at least for the next two months.

In line with the new risk position on the Kenyan equities market, Stratlink considers that a slip below 4,800 points on the NSE 20-share index would only be informed by profit taking. The bourse has been experiencing minimal movement in the 4950-5000 points range in the past two weeks.

“We now expect to see the index rise and stay above the 5,100 point mark in the next few weeks,” said Stratlink.