Capital Markets

Kenya excels among its frontier market peers

Monitoring trading at the Nairobi Securities Exchange. FILE PHOTO | NMG
Monitoring trading at the Nairobi Securities Exchange. FILE PHOTO | NMG 

Kenya had the second best performance among key frontier markets in March, analysts at Citi have said in their latest report.

Referring to the Morgan Stanley Capital International (MSCI) indices, Citi said Egypt led the group of frontier markets with 12 per cent increase against Kenya’s nearly 10 per cent.

For Kenya, the MSCI Frontier Markets index captures the largest and most liquid companies including Safaricom #ticker:SCOM, Equity Bank #ticker:EQTY, KCB #ticker:KCB, East African Breweries Ltd (EABL) #ticker:EABL and Barclays Bank #ticker:BBK.

The Citi report showed the other top performers were Vietnam and Romania — which are also classified as frontier markets, a group of small markets that attracts significant interest from international investors.

The poorest performers in March among key frontier markets were Nigeria, the Philippines and Argentina.

“Strong performance from Kenya, Vietnam and Romania (up six to 10 per cent in the month) offset declines in Nigeria ( negative six per cent) and Argentina (negative two per cent),” said Citi analysts.

Overall, the frontier markets performed better than all other markets which experienced a decline.

“Much as was the case in February, the frontier market held its value better than other regions in March, with a flat performance (+0.2 per cent) compared with a 2.2 per cent decline in the emerging market and a 2.5 per cent decline in developed markets,” said Citi.

Kenya came second in the last 12 months. Kenya has seen recovery in the Nairobi Securities Exchange (NSE) with nearly 30 per cent rise last year and 3.6 per cent in the first quarter of this year.

In March alone, the index increased by 2.5 per cent underlining the extent to which the dissipation of election-related jitters and the projection of higher economic growth have positively impacted investor sentiment.

Frontier markets’ total assets under management were flat in February but still remained at a three-year high of $20.6 billion (Sh2.06 trillion) — indicating that international investors were increasingly putting money in smaller markets — Citi analysts said. The interest in frontier markets is driven by stock performance.