Equity investors at the Nairobi Securities Exchange (NSE) enjoyed the highest returns among the major investment asset classes in the first half of the year, earning more than those who put their money on bonds, fixed deposits, and property.
Investor wealth at the Nairobi bourse grew by 25 percent or Sh477.3 billion in the period, riding on a strong second quarter of the year when a number of large firms, including Safaricom, KenGen, KCB Group, and NCBA Group, saw their share prices jump on renewed interest from local and foreign investors.
The market has defied a number of shocks including the recent protests in the city, and the US government’s announcement in April of broad tariffs on its trading partners, which set off fears of a global recession and flight of capital from emerging and frontier market financial assets.
In contrast, interest rates on new auctions of Treasury bills and bonds fell by between 1.6 and 1.8 percentage points over the six months in line with the Central Bank of Kenya (CBK) cutting its base rate to 9.75 percent in June from 11.25 percent in December 2024. Fixed deposit rates in banks also declined as the lenders transmitted the lower central bank rate (CBR) to their cost of funding.
Land and house sale price growth in Nairobi and its satellite towns remained in the lower single digits in the first quarter of the year at between 1.7 and 2.5 percent, as per analysis done by real estate firm HassConsult.
Given its higher growth prospects, the NSE saw improved capital inflows over the period, sustaining the rally seen in 2024 in which investor wealth grew by 34 percent or Sh500 billion, breaking a two-year bear run.
“In 2024 the NSE posted a good upside in part due to the anticipation of strong banking sector earnings and dividends, but that said, the 34 percent growth was more of a recovery than a rally, given that the NSE All Share Index still closed below 2022 levels,” said Wesley Manambo, a senior research associate at Standard Investment Bank.
“On this account, 2025 will likely also close on a bullish note on more price recoveries. Further, as interest rates fall and investors become more risk-on, we may see select sectors at the bourse benefiting from the pricing-in of fundamental growth that has happened in the post-Covid period.”
Safaricom led in market capitalisation gains (the measure of investor wealth) over the half year, adding Sh318.5 billion to hit a valuation of Sh1 trillion after a 46.6 percent growth in share price to Sh25.
It was followed by KenGen, whose 104.9 percent share price jump to Sh7.46 yielded a Sh25.2 billion increase in market capitalisation to Sh49.2 billion. Firms with high valuation growth over the period included NCBA at Sh18.62 billion to Sh98.03 billion, KCB at Sh16.06 billion to Sh149.7 billion, and Kenya Power at Sh13.06 billion to Sh22.4 billion.
A number of small-cap stocks have also recorded large share price gains on increased demand from speculating buyers, led by TransCentury at 187.2 percent to Sh1.12 per share.
TransCentury was put under receivership by Equity Bank on June 20 due to unpaid debt.
Others with large gains are Sameer Africa, up 84.4 percent to Sh4.48 per share, Home Afrika at 83.8 percent to Sh0.68 per share, and Uchumi Supermarkets at 70.6 percent to Sh0.29 per share.
In the fixed income market, interest rates on Treasury bills have declined to 8.13 percent, 8.46 percent, and 9.72 percent on the three, six, and 12-month securities respectively from a range of 9.9 percent to 11.4 percent in December 2024.
Bonds issued this year are offering yields of between 13.5 and 15.7 percent, down from a range of 14.7 percent and 18.9 percent last year depending on the duration of the security.
Holders of the 6.5-year and 8.5-year infrastructure bonds that were floated in November 2023 and February 2024 at high interest rates are, however, enjoying price premiums of 16.6 percent and 22.4 percent respectively per bond unit of Sh100, owing to the high demand for the papers amid falling yields on new issuances.
For those putting cash in fixed accounts in commercial banks, the average rate went down to 8.87 percent in April, from 10.45 percent in December 2024. The shilling value of dollar deposits has meanwhile remained largely unchanged over the period, with the exchange rate stabilising at around Sh129 in the past 10 months.
The lower T-bill and cash deposit rates have also translated to lower annual yields on unit trust money market funds (MMFs), which invest largely in the two assets. Average returns on MMF shilling funds stood at between 4.73 percent and 13.47 percent at the end of June, down from a range of 7.03 percent and 16.8 percent at the end of December 2024.
Capital Markets Authority (CMA) data shows that the number of investors in the collective investment schemes hit 2.02 million with investments of Sh496.2 billion in March 2025, up from 247,409 investors with assets of Sh155.6 billion in September 2022.
