What's in Store for the Nairobi Stock Exchange in 2014?

To bull, or not to bull: that is the question!

The new year is fast-approaching and the question in most Kenya investors’ minds is, “How sustainable is this bull run?”

I’m optimistic that we’ll see yet more upside. Here are six reasons why:

1. Many companies will report double-digit profit growth for their 2013 fiscal years.

2. Inflation is stable and interest rates remain low, both of which are favorable for equity markets.

3. Political risk weighs less on investors’ minds these days.

4. Economic growth is set to accelerate as the national and local government settles in and begins to initiate development projects.

5. Kenya remains one of foreign funds’ favorite frontier markets due to our vibrant and progressive market environment, which acts as a point of entry into the region.

6. Finally, and perhaps most compellingly, the Nairobi Stock Exchange looks cheap on a historical basis. It has been in recovery mode ever since 2008, when post-election violence and the global financial crisis prompted foreign investors to abandon the market. Now after five years of growing profits, the NSE 20 Index still hovers around the psychological 5000 marker, which is where we were before the drop.

So, how can Kenya investors best ride the bull?

Of the five companies that doubled in value in 2013, three are insurance companies, one is an investment firm, and the other a technology business.

I believe value remains in all three sectors. Let’s take a look at each in turn.

Insurance companies

Insurance penetration is 3% and our vision 2030 goal is to increase that figure to more than 12%. This indicates that the sector is likely to see much more in terms of growth. Presently, this growth is being driven by:

Nairobi Stock Exchange
Samuel Gichohi of NIC Securities
  • The banking sector, which increasingly links loans to insurance products,
  • The growth of cooperatives and SMEs,
  • Kenyans’ rapid adoption of health insurance, and
  • The strong performance of capital markets (where insurance companies invest much of their float).
Investment firms

Investment companies like Centum, TransCentury, Carbacid and even insurance companies like Britam have recently embarked on ambitious investment programs in real estate, oil and gas, mining, agribusiness, tourism and infrastructure.

This has led to renewed interest in investment firms because there simply aren’t easily accessible alternative ways to invest in these exciting sectors.

IT businesses

Information technology has become the backbone upon which the blossoming financial sector rides. The two sectors are so integrated in Kenya that some observers have even suggested that the country’s largest telecom, Safaricom, is competing with the banks.

This is a misguided perception, in my view, because Safaricom has much more to gain from providing all banks with the connectivity and capacity to carry out efficient financial transactions. It thus cements its position as the main provider of the underlying technology.

In 2013, we saw AccessKenya bought out by Dimension Data of South Africa. This is a strong indication that strategic investors are positioning themselves for the next frontier of technological penetration — data. Safaricom is aggressively laying out a fibre-optic network and offering free connection to potential users. Thus, they’re the odds on favorite for dominance.

What else should Kenya investors look for in 2014? Here are a few predictions.


The banking sector is still in growth mode, albeit at a more sluggish pace than we have witnessed in the past five years.

However there I believe a lot of potential remains in regional expansion, SME lending, infrastructure finance, and the provision of online and mobile banking.

The usual suspects remain strong on the growth front, especially KCB, Equity Bank, NIC Bank and Diamond Trust. Those banks with conservative business models, however, will continue to lose ground as we go forward.

One exception, however, might be National Bank of Kenya. They’ve re-branded, begun to clean up and grow their loan book, embarked on an ambitious expansion strategy and recruited a new executive team. The bank’s cash call will be really exciting to watch. I hope the Kenyan government dilutes its stake in the bank, freeing it up to be more growth-oriented.

I’ve also got high expectations for I&M Bank, and I’m hoping that we’ll finally see an IPO for Family Bank, which could signal a round of new listings on the market.


The energy sector remains a very strong long-term play due to the magnitude of the economic development that it must support. Kengen and KPLC may not be very attractive to impatient investors, but for long-term, dividend-oriented investors they are a great place to park funds.

In the shorter term, we will see investment companies like TransCentury, which has a focus on energy, oil, and railway infrastructure begin to see increased investor interest.


Kenya’s cement industry remains vibrant as evidenced by the number of new industry participants (Simba Cement, Mombasa Cement, and probably Dangote Cement).

Of the listed cement companies, Bamburi Cement remains very strong, especially on the back of big infrastructural development tenders. But I believe that they will be the most affected if any of the new entrants can offer cheaper cement of similar or superior quality.

I sense trouble at East African Portland Cement after the Industrialization Principal Secretary questioned the company’s dividend payout and the credibility of its financial reporting.

ARM Cement remains the most competitive of the three with a lean and efficient management, local manufacture of clinker, product diversification, regional presence, and low cost of product to market. All of these factors put the company in a position to price their products competitively enough to match imported cement.


The agricultural sector is currently under attack on the M&A front as investment firms and real estate developers eye their prime land holdings. Rea Vipingo is already the target of a buyout with competing bids from Centum, Dilesh Bid, and the Robinow brothers. I expect to see more M&A action in the industry going forward.

Odds and Ends

The new year will also likely see :

  • the NSE’s self-listing take place following its demutualization in 2013,
  • commodity and derivatives markets finally begin operation in Kenya after licensing issues are ironed out,
  • more listings on the GEMS market,
  • the launch of the long-awaited REIT segment,
  • and an online trading platform that will bring stock trading into our homes.

So, 2014 is set to be one of the most exciting years in recent history for the NSE and for Kenya’s capital markets generally. As a market intermediary, I wish you all a bullish 2014!

Samuel Gichohi is Business Development Manager at NIC Securities, Ltd.

Related Reading

How to Invest on the Nairobi Stock Exchange

Print Friendly


  1. pesa_Africa says

    Great summary. Overall sentiments on what to expect from equities at the NSE bourse in 2014 are right on the money.

    I do disagree with your outlook on the commodities and futures exchange set up, however. You are overly optimistic. I do not see this actualizing fast enough. A lot of capital market reforms need to occur to have a reliable futures market. 2015 perhaps. Especially if the pace of demutualization is anything to go by. I hope to swallow my words.

  2. Denis says

    I am glad i came across this article. I share most of your optimism especially when it comes to the NSE demutualization. I will definately ride that wave into the long run.

  3. says

    We are half way through the year I felt that a brief rain check on the accuracy of my views is in order:
    :- Companies did report double digit numbers as expected and this triggered another rally albeit at a declining rate.
    :- Inflation has remained within a thin band having climbed gradually from 7.21 to 7.31 currently. we however saw it bottom at around 6.2 in March 2014.
    :- NSE’s self-listing IPO is ongoing and this will pave way for further development as envisaged.
    :- Commodity and derivatives markets licensing issues are being ironed out and we are on course to seeing these new markets operational going forward.
    :- One more listing on the GEMS market is at the advisory levels and we expect to see this materialize be the end of 2014.
    :- The launch of the long-awaited REIT segment is also on course with a D-REIT in the advisory stage.
    :- all brokerage houses will implement the industry wide online trading platform that will bring stock trading into our homes and NIC Securities is on course to launch the first ever fully operational Mobile Trading Platform to complement the banks NIC NOW Mobile Banking offering.

Leave a Reply

Your email address will not be published. Required fields are marked *