By Jeremy Ogolla
A new report indicates that Kenya’s economy is expected to register high growth levels driven by investments.
Exotix Partners in its latest Kenya Banks Update report says commodity prices are expected to remain low and government spending is coming under greater scrutiny from investors in most countries, but investment-led economies such as Kenya are most likely to continue delivering high rates of growth.
In the latest report by Exotix entitled Kenya Banks Report, Kenya has been prized as one of the stronger economies in Africa.
The report says that in contrast to the commodity-producing nations elsewhere on the continent, growth in Kenya is driven by investment more than consumption or net exports.
Its report reads in part: ”In a world where commodity prices are expected to remain low, and government spending is coming under greater scrutiny from investors, we think that investment-led models such as Kenya’s are the most likely to continue delivering high rates of growth.”
Data for the third quarter of last year show that Kenya’s economy was expanding well above the Sub-Saharan African average of 3.8%, growing at 5.8% year on year in the quarter and an average of 5.4% over the year.
The achievement is against the backdrop of fairly volatile market conditions where the NSE 20 fell 15 percent in quarter-three; the shilling sold off by over 7%; and the inter-bank rates spiked to over 25%.
The report predicts a calmer forex market condition this year when compared to last year. It notes: “On the market front, we expect 2016 to be a year of greater FX rate stability. Our interpretation of the sharp sell-off in 2015 is that it was more a market phenomenon than a fundamental one.’’
On listed banks, Exotix Partners recommends that investors buy KCB, Cooperative Bank of Kenya, NIC and Diamond Trust Bank shares. The firm places CFC Stanbic stock on hold.
Exotix Kenya Banks Report indicates that Cooperative Bank of Kenya shares posted the lowest declines among listed bank stocks in 2015, with the share retreating 10 percent, as compared to the 22 percent average decline in share prices of listed banks.
The report says Coop Bank is likely to sustain the good performance this year driven by the ‘Soaring Eagle’ Transformation Agenda that Co-op Bank rolled out in 2014.
Exotix says the KCB stock is a good buy given the bank’s bellwether status for the sector and its consistent profitability profile.