NAIROBI, Kenya Jan 9 – Bank stocks are the ones to watch out for in 2015, according to experts.
Afrika Investment Bank (AIB) Capital Investment Analyst Parshv Shah says this will be due to lower inflation expected in 2015 due to falling global oil prices.
“Lower inflation will in turn reduce Treasury Bill rates resulting to lower Kenya Bankers Reference Rate (KBRR) that will then ease the cost of debt for private companies and encourage demand for credit for expansion purposes, “he said.
He said banks highly reliant on interest income are expected to take a hit as a drop in interest rates will trigger lower net interest margins, lower growth and lower return on equity.
“With Lower KBRR we expect to see lower net interest margins, which would affect non-diversified banks who are set to record lower growth numbers and lower return on equity ratios. However diversified banks that include Kenya Commercial Bank, Equity Bank, CFC Stanbic Bank and Co-operative Bank will be enjoying growth from the non-interest segment which will decrease momentum in the stock prices.”
“We recommend a hold for diversified banks and buy foreign darling stocks, “Shah said in an Interview with Capital FM Business.
Safaricom and Equity stocks will also see increased activity as Equity continues to battle Safaricom after acquiring a Mobile Virtual Network Operator (MVNO) license which allows it to offer services such as voice, data and especially mobile money transfers.
“Equity intends to capture a fair share to increase its non-interest income; Safaricom on the other hand continues to roll out “Lipa na M-PESA “aggressively in order to retain its market leadership,” he added.
He said that there will also be momentum in the manufacturing and construction stocks as falling electricity prices are expected to positively influence their performance.
“As cost of production reduces we expect shareholders earnings to rise, energy costs account for approximately 50 percent of the total cost of production for construction costs, “he added.
Foreign investor activity at the bourse is also expected to gain momentum as the falling oil prices will see foreign portfolios reduce allocations in oil exporting countries and increase allocation in oil importing countries that includes Kenya.