East Africa’s pioneering Investment Management Firm (ICEA LION) Asset Management has urged investors to invest in the Nairobi Securities Exchange (NSE) for the long term and treasury bills, short term bonds and Dividend-heavy stocks for the near term.
Speaking today during the presentation of the 3rd Quarter 2022 Investor Pulse themed ‘Investing in the Time of Trifecta’, ICEA LION Asset Management Senior Portfolio Manager, George Kamau, said the Nairobi Securities Exchange Ltd All Share Index (NASI) has traded at all-time lows recently but the fundamentals of numerous listed companies remain solid.
Mr. Kamau stated as the country faces the prospect of a stubborn bear market, investors with a long-term investment horizon have attractive entry points being made available under the prevailing environment.
“For investors with a near term investment horizon, they are better off investing in treasury bills and short-term treasury bonds, as well as high dividend paying stocks,” said Mr Kamau.
He observed that currently the world is grappling with a possible global recession emanating from stifled demand, rising inflation, supply chain disruption and geopolitical tensions which, coupled with domestic challenges of poor rainfall and political uncertainties, puts further pressure on investors to preserve their capital.
Further, Mr. Kamau noted that global supply chain disruptions and local weather patterns drive inflation above the Central Bank of Kenya (CBK) upper limit as another factor as inflation has hit several countries around the globe due to supply chain constraints as well as increased household liquidity in developed countries.
“Inflation in Kenya has risen due to these global developments as well as poor rains locally. Inflation is projected to decline in 2023 although that is dependent on the effectiveness of monetary tightening policies enacted by central banks,” he stated.
In line with the trend internationally, Mr. Kamau explained that the Monetary Policy Committee (MPC) is expected to further raise the Central Bank Rate by 0.5-1 percent during its meeting later in July adding that transmission of this policy to the real economy will however be subject to the cash-based nature of Kenya’s economy and the cost-push nature of inflation in Kenya
He also mentioned that the Russia-Ukraine war has contributed to the shilling’s weakness and pointed to a high-rate regime
Despite the slowing economies in the West, he commented that the war in Ukraine has led to an increase in the cost of energy and imported foodstuffs, further exacerbating the impact of currency depreciation and weak rains.
“The depreciation of the Kenya shilling has partly been caused by global investors seeking refuge in the USD as the world’s reserve currency. Consequently, there is scope for a higher rate regime to develop in the remainder of the year,” added Mr. Kamau.
In his remarks, ICEA LION Asset Management CEO Einstein Kihanda, who is also the current Chairman of the Fund Managers Association said despite the global challenges investors are facing as well as poor rains locally, Kenyans still have the opportunity to invest.
“With the appropriate investment strategies, investors can ride the trifecta wave safely and still preserve their capital,” said Mr. Kihanda.
By Catherine Muindi