Serrari Group

Morgan Stanley Capital International (MSCI) has dealt a blow to Kenya’s global market aspirations by blocking new companies from joining its stock market platform. The move, influenced by concerns over dollar shortages and financial instability in Kenya, extends a freeze initiated by MSCI in August 2022, affecting not just Kenya but also Bangladesh, Egypt, and Nigeria.

Deteriorating liquidity in Kenya’s forex market prompted this decision, making it challenging for foreign investors to repatriate capital. MSCI’s quarterly reviews, crucial for shaping the MSCI Kenya Index, have been suspended. These reviews, held in February, May, August, and November, determine the addition or removal of constituent companies, influencing their weight within the index and sending a cautious signal to potential investors.

The freeze has far-reaching implications for major Kenyan players like Safaricom, Equity Group, and EABL, which form part of the MSCI Kenya Index. This comes at a time when Kenya’s market performance, measured by MSCI, stands as the worst among the 10 African bourses tracked on the frontier and emerging markets indices. The Kenyan index has retreated by 47 percent, surpassing other African counterparts in negative returns.

The combined impact of a weakened shilling and declining share prices has taken a toll on Kenya’s market. The shilling has depreciated by 19.4 percent against the dollar in 2023, according to the Central Bank of Kenya rate. Market capitalization has dropped by Ksh541.3 billion to Ksh1.44 trillion.

Safaricom, the largest stock on the NSE, has seen its share price fall by 39 percent this year, contributing to the overall decline in the MSCI Kenya Index. Despite these challenges, Kenya remains optimistic about market recovery. Stakeholders are closely monitoring liquidity and market conditions, recognizing that the resolution of dollar shortages and financial turbulence is pivotal for Kenyan firms to regain access to the global stage.

Photo (Chinmay Rautmare)
By: Montel Kamau
Serrari Financial Analyst
29th November, 2023

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