Sustainable investment now demands a balanced approach, one that not only meets current financial objectives but also safeguards the future.
Foreigners’ portfolio investments in Kenya more than doubled in the 12 months to June this year, reflecting an improving investor sentiment about the country.
Portfolio investment liabilities are assets such as stocks, government or corporate bonds, and other financial instruments held by foreign nationals and generally reflect the country’s attractiveness abroad.
As of June, such investments hit Sh6.4 billion ($49.5 million), a 121 per cent rise from the negative value of Sh32.6 billion ($233.4 million) in June last year, latest data from the Central Bank of Kenya (CBK) shows.
Experts say this is a sign of improving investor confidence in the Kenyan market, and an indication that the country’s economic situation appears promising to far-away investors, at least in the short-term.
“There’s been some rebound in foreign investor sentiment locally, with the taking up of equities, investments, and securities, and that has now increased portfolio investments from a negative position into a positive position,” said economist Churchill Ogutu of IC Asset Managers.
Kenya’s portfolio investment liabilities have been in the negative zone since June 2022, when the United States Federal Reserve rate rise caused a rapid appreciation of the dollar and an outflow of investments from several emerging and frontier markets such as Kenya.
This meant that the total value of financial assets held by foreigners in the country was much less than those held by Kenyans overseas, an indication of negative investor sentiment,
Analysts say a cocktail of economic difficulties, including a weakening shilling, high inflation, and the perceived high risk of Kenya defaulting on loans restrained investment inflows into the country for the last two years, but this is now changing.
The value has been improving since June last year but crossed to the positive side for the first time in March when it rose from a negative figure of Sh13.4 billion ($88.1 million) in February to a positive Sh2.1 billion ($15.6 million).
“That’s the time there was that big appreciation of the shilling, so it would have made sense to invest into a Kenyan asset to be able to capture the shilling’s gain,” Mr Ogutu said, adding that the jumbo rate hike by the CBK in December could have also contributed to the improved sentiment.
Since March, CBK data shows that foreigners have continued to steadily increase their portfolio in Kenya, but it is yet to hit the over Sh115 billion level last recorded in 2022 before the global economic turbulence saw mass capital outflows from smaller markets.
The performance of the country’s capital markets has also been pointing to increasing returns for investors over the last year.
