Serrari Group

In another setback for Kenya’s financial markets, Morgan Stanley Capital International (MSCI) has once again chosen to exclude Kenyan companies from its MSCI Equity Index for frontier markets. This development underscores the deteriorating investment climate in Kenya, marked by factors such as an unpredictable taxation regime, a dollar shortage, a weakening currency, and high fuel costs, all contributing to heightened pressure on the cost of living.

This is the second time in three months that Kenya’s listed firms have faced exclusion from the MSCI Equity Index for frontier markets, reflecting growing apprehension about foreign investment in the country. Kenya now finds itself alongside Bangladesh, Egypt, and Nigeria, countries whose stocks have also been blacklisted by MSCI.

The MSCI Equity Index holds substantial sway over foreign investors’ decisions in emerging and frontier markets. With Kenya’s exclusion, there is a heightened risk of decreased foreign investment, potentially resulting in a decline in stock prices and reduced liquidity in the Kenyan market.

The exclusion of Kenyan stocks from the MSCI Equity Index emphasizes the urgent need for the Kenyan government to address the underlying issues affecting the investment climate. Restoring investor confidence and attracting foreign capital is crucial for Kenya’s economic growth and stability. The government must take prompt and effective measures to mitigate these challenges, ensuring a more favorable environment for both local and international investors.

Photo (Morgan Stanley Capital International (MSCI))

27th November, 2023
By: Delino Gayweh
Serrari Financial Analyst

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