•Global shocks have sent jitters to smaller markets such as Kenya’s in the form of capital flight to the larger economies which are seen as safe for investors.
•The advisory firm is now proposing for fast tracking of the process to Privatise profitable State owned enterprises in Kenya
Tough financial policies locked Kenya out from benefiting from foreign funds destined for the frontier markets.
This is according to advisory financial services corporation EFG Hermes.
The advisory firm says Foreigners are unhappy with FX conditions in the country which has seen resources diverted to other states.
Ronak Gadhia, a financial analyst and Director of Sub-Saharan Banks at EFG Hermes says that a majority of African states are recording increased flows to frontier markets but Kenya and Nigeria’s financial policy remain an impediment.
“We are witnessing situation where investors are shying away from investing in markets where they cannot be allowed get their money out,” said Gadhia.
EFG Hermes says the reduced forex reserves have meant that it is now very hard to get money out of Nigeria since 2020 with Kenya now experiencing the same after its FX reserves maintained a downward trend in the past three months.
Global shocks have sent jitters through to smaller markets such as Kenya’s in the form of capital flight to the larger economies like the United States, which are seen as safe havens for investors.
“FX shortage is not just a problem for foreign stock investors, it disrupts the whole economy therefore something must change” added Gadhia.
Impact from external markets have seen foreign investor trading activity at the Nairobi Securities Exchange (NSE) fall by half last week as concerns over the effect of tighter Covid-19 restrictions in China hit global markets and pushed capital into safe havens.
Analysts reckon that investors have also fretted over the availability of dollars in the market should they wish to exit.
This has slowed external inflows onto the markets, further delaying sales by stocks holders.
The advisory firm is now proposing for fast tracking of the process to Privatise profitable State owned enterprises in Kenya and a Change in incentives for local pension funds to allow them invest more in the capital markets.