•Interest rates on domestic treasuries are also at a six-year high, which provides fixed income investors with a window to recoup their invested capital at a quicker rate.
•For offshore investors, current yields on some of Kenyan Eurobond indicate that returns of 30 per cent in the US dollar terms can be achieved in less than two years.
Stocks in listed banks and government securities offer investors good returns the medium to long term, according to investment management firm ICEA Lion.
This, the firm says is despite continued market volatility mainly on global factors.
These include the Russia-Ukraine war, rising inflation and rising interest rates in developed markets which is expected to increase even further in coming months.
Flight to safer markets by investors has seen the US dollar strengthen to a 20-year high, which coupled with the interest rate hikes, resulted in sharp losses for both fixed income and equity investors.
However, there are still opportunities for investors to generate strong returns in the local market, asset managers say.
This is in the wake of a strong half year performance by the Kenyan banking sector which reported a cumulative profit of Sh88 billion, putting them on the run to surpass last year’s profitability of Sh139 billion.
ICEA said the banking sector bears a strong future with some listed banks on track to double their profits in the next four years.
Some listed firms are equally recovering from a slump in share prices weighed down by recent capital flights.
The flight was occasioned by foreign investors seeking higher returns in developed markets driven by a rise in interest rates.
This has offered investors opportunities to snap up cheap stocks amid an anticipated bullish market, albeit long-term, on easing of interest rates.
The introduction of the risk-based lending is also expected to drive up loan books, as banks offer more to the private sector amid reducing appetite for government securities.
Lending to private sector is also recovering to pre-interest rate cap levels.
According to the Central Bank of Kenya, growth in private sector credit stood at 12.5 percent in August 2022, compared to 12.3 percent in June.
According to ICEA Lion Asset Management, senior portfolio manager Richard Muriithi said shareholders capital in banks could double hence offer high returns.
“We are very bullish on the banking sector,” Muriithi said, during the presentation of the firm’s quarter four Investor Pulse report.
Major listed large-cap stocks at the NSE are NCBA, Safaricom, KCB and Standard Chartered, with lenders such as Equity and Co-operative Bank remaining pivotal.
Interest rates on domestic treasuries are also at a six-year high, which provides fixed income investors with a window to recoup their invested capital faster with low additional risk, the investment firm further notes.
For offshore investors, current yields on some of Kenyan Eurobonds indicate that returns of 30 per cent in the US dollar terms can be achieved in less than two years.
Despite the good tidings in stocks and bonds, inflation levels are projected to remain elevated, having hit multi-decade highs in the developed world and multi-year highs in Sub-Saharan Africa.
In Kenya for instance, inflation rose to a five-year high of 9.2 mainly driven by rising food prices.
“Despite the clouds hovering over markets currently, investors should not lose sight of the silver linings that may be contained their-in,” ICEA Lion Asset management CEO Einstein Kihanda said.