NAIROBI, Kenya, Jan 23 – The bear run in the Nairobi Securities Exchange (NSE) is expected to continue throughout 2017 according to investment analysts.
Analysts at ICEA LION Asset Management attribute this to foreign investors who continue to favor the United States market owing to their recent Interest rate hike by 0.25 percent.
ICEA LION Asset Management Chief Executive Einstein Kihanda says the stock market will also be hit by the uncertainty surrounding the upcoming local general election.
“2016 ended with a low tone on equities and bonds as investment options since declining prices made up most part of the year. As we enter 2016, we are cautiously optimistic about the market in general. On equities, we do not expect a market bull run in the near term as the US Fed raised interest rates by a quarter percentage point and pledged a gradual pace of increases, this will limit action from foreigners who contribute much of the turnover in our equity markets,” Kihanda said.
Last week Bloomberg Business Ranked NSE as the worst-performing market globally year to date.
Meanwhile Kihanda says the Kenyan shilling is expected to be under pressure during the period on the back of improving economic conditions in the US which has led to the strengthening of the US Dollar globally.
The shilling has already hit the 104 mark to the dollar and could continue weakening if the dollar continues to strengthen.
The strengthening of the dollar is heightened by the US Federal Reserve Rate hike which is expected to continue raising rates as the US economy continues to gather momentum.
He projects a decline in private sector lending decline due to the recently passed Banking Act that has made access to credit harder among most businesses as banks limit lending to the government and high quality borrowers.
“We view the recently passed Banking Act as a detriment to private sector growth, which remains a major contributing factor to the country’s GDP. We expect to see the full effect of the Act in the fourth quarter banking results.”
However, Kihanda notes the country is likely to continue recording low private sector credit growth mainly as a result of the new loan pricing framework brought about by the Banking Act Amendment which is likely to lock most of the consumers and SMEs from accessing loans.