Kenyan stock prices at more than three-year lows may have further to fall with domestic investors favouring bonds and foreign buyers waiting for lower valuations, the head of the bourse said.
Shares on the Nairobi Securities Exchange have dropped 6.9 percent since January 1, extending last year’s 8.5 percent decline, because of jitters among investors about elections scheduled for August. The yield on Kenya’s benchmark 10-year bond has fallen almost 200 basis points to 14.02 percent on Tuesday from a high of 16 percent in February, according to data compiled by Bloomberg.
“Because of issues around volatility in the markets, most pension schemes over the past two years have lost value in their equity holdings so they want to play a bit safer,” NSE Chief Executive Officer Geoffrey Odundo said in an interview Monday at his office in the capital. “Interest rates have historically given them a better performance so that is why they are willing to buy government paper.”
Kenya’s stock exchange is the world’s worst performer so far this year, with the decline dragging valuations to the weakest since 2009, when Bloomberg began compiling the data.
The recent decline may present a buying opportunity for investors, particularly “liquid stocks” including Safaricom Ltd., East Africa’s biggest mobile-phone company, and East African Breweries Ltd., the region’s largest brewer, and KCB Group, the No. 1 bank by assets, Exotix Partners said in an e-mailed note on Monday.