This research report was prepared by the Research Department of Old Mutual Securities Limited. Old Mutual Securities Limited is a securities trading company licensed by the Capital Markets Authority (Kenya) for the purpose of facilitating trade on the Nairobi Securities Exchange.

Here are our views on the news making headlines today for Kenya:
Foreign investors over the past three months withdrew a net Sh2.6 billion ($27.5 million) from Kenyan stocks in profit-taking and portfolio rebalancing that favoured Nigeria, marking the second consecutive quarter of outflows.

Our View: Capital flight was initially fuelled by the re-introduction of CGT which was replaced by a transaction levy in the year’s national budget which was read last month citing implementation challenges. Since Q1:15, there has been concerns that the Fed might consider rate hikes in the year as U.S unemployment rate decreases and the fear that this could exacerbate inflation levels above the government target of 2%. This anxiety along with Greece crisis have left both emerging and frontier markets bleeding due to capital withdrawals. There are also concerns that if Fed raises interest rates later in the year, this could cripple the bonds market as liquidity dries up.
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