Investors in Kenya have found lucrative opportunities in lending to the government and investing in hard currency during the first six months of this year.
According to Business Daily analysis, returns from government bonds averaged 13.64%, up from last year’s 12.83%. The seven-year tax-free infrastructure bond provided the highest return at 15.84%. Treasury bills also saw increased returns, exceeding 12%.
In contrast, the equities market faced challenges due to foreign investor selling, although losses were less severe compared to 2022. The Nairobi Securities Exchange (NSE) experienced a decline of Ksh320 billion in investor wealth, with all three indices remaining in the red. The property market also struggled, offering flat rental and sales returns.
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“There is an aspect of flight to safety which has been baked in with a higher allocation to fixed income. Getting into this year the macroeconomic environment was not that convincing, which has led to a negative outlook for the other asset classes like equities and real estate,” said Churchill Ogutu.
“In that scenario, fixed income offers investors a safe haven as they monitor the situation.” He added.
Cash holdings in both local and hard currency yielded positive results. Dollar deposits in local banks gained 12.2% due to the appreciation of the US currency against the Kenyan shilling. Offshore investments also performed well, driven by higher interest rates and rising stock markets in western economies.
However, allocations to these assets remained low for institutional investors like pension funds. Fixed deposits in banks increased to an average interest rate of 7.57% in the first four months of this year, up from 6.55% in the same period in 2022.
Small savers, however, saw minimal gains at around 3.6% due to banks relying more on wholesale deposits.
Investors looking for opportunities in Kenya should consider government bonds, Treasury bills, hard currency holdings, and offshore investments. Above all, it is important to conduct research, seek professional advice, and assess risks before making investment decisions.
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