Kenya’s Benchmark Stock Index Poised for Gains on Golden Cross

NAIROBI, Kenya, Capital Market in Africa — Kenya’s benchmark equity index is set to extend gains as falling yields on government debt prompt investors to seek better returns in stocks.

The 50-day moving average for the Nairobi Security Exchange All Share Index climbed above the 200-day moving average this week for the first time since 2012, a so-called golden cross that signals to some traders that further gains are in store. Yields on government 164-day paper have dropped 10.61 percentage points since October to 11.75 percent after the government announced cuts in spending and borrowing.

 “Sentiment is changing,” Rufus Mwanyasi, chief executive of Nairobi-based Canaan Capital, said by phone. “There is no alternative since yields in the fixed income segment and the inter-bank market are falling, and that money must find a way somewhere.”

Kenyan stocks have been buoyed by a return of foreign investors, who bought a net $4.9 million of equities in the first quarter, compared with an outflow of $34.4 million in the comparable quarter last year, according to data from Nairobi-based Standard Investment Bank Ltd. The bourse has gained 0.6 percent this year, recovering from an 11 percent decline in 2015.

“For most fund managers investing in sub-Saharan Africa, Kenya is the best option, given the challenges in Nigeria and South Africa,” Tracy Kivinyu, a research analyst at Nairobi-based Africa Alliance, said by phone. “Kenya is the place for value stocks, and is looking attractive to investors.”

The last time the index had a golden cross was in 2012, marking the start of a bull run that continued for 3 years and saw the gauge more than double.

Source: Bloomberg News