Bloomberg News

Kenyan Stocks, Africa’s Worst in July, Retreat for Third Month

July 29, 2011

July 29 (Bloomberg) -- Kenya’s stock index headed for a third month of declines and is Africa’s worst performer in July as investors bought fixed-income assets with better returns, with government yields at a nine-year high.

The 55-member Nairobi Stock Exchange’s All-Share Index increased 0.6 percent to 66.24 by 12:13 p.m. in Nairobi, the capital, paring its drop this month to 5.8 percent. The gauge has fallen 15 percent this year.

Kenya’s three-month borrowing costs climbed to 9.01 percent at yesterday’s sale of 91-day bills. The yield reached 9.016 percent on June 9, the highest since May 2002, as price growth soared on rising food and fuel costs. Inflation accelerated to almost triple the targeted pace of 5 percent in June, reaching 14.5 percent.

“With the higher interest rates, investors are looking more into debt and limiting their exposure on equities,” Eric Musau, a research analyst at Nairobi-based Standard Investment Bank Ltd., said by phone today.

Pan Africa Insurance Holdings Ltd., a unit of South Africa’s Sanlam Ltd., led declines in percentage terms this month. The stock slipped 0.8 percent to 32 shillings today, taking its drop in July to 23 percent. CFC Insurance Holdings Ltd., a unit of CFC Stanbic Holding Ltd. fell 18 percent in the month.

“With the stock exchange performing dismally, it is generally expected that insurance companies are not going to do well because they invest some of their premiums in equities,” Musau said. “They are also making losses on their fixed income holdings,” as yield lag inflation, he said.

--Editors: Ana Monteiro, Linda Shen

To contact the reporter on this story: Eric Ombok in Nairobi at eombok@bloomberg.net

To contact the editor responsible for this story: Shaji Mathew at shajimathew@bloomberg.net


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