NSE defies unrest, economic hardships to post huge rebound

The weeks to July 4, this year, were marked by significant political activities in the country, especially protests, as Kenyans agitated against the excesses of the National Police following the death of blogger and teacher Albert Ojwang.

Others were shot dead during the June 25 protests as Gen Zs remembered the young people killed by police last year during the anti-Finance Bill protests.

Aside from the protests, the country has been marked by heightened political noise as both opposition and government-aligned politicians exchange unsavoury words and blame each other over the direction that Kenya is headed. 

These and other scenarios unfolding in Kenya would fit the textbook definition of an unstable political landscape, which sends investors scampering for safer business havens under normal circumstances.

The opposite has however been happening at the Nairobi Securities Exchange (NSE), which has over the last one and a half years registered significant growth.

Analysts say, investors, who are often jittery and would pull out their money at the slightest show of danger, are treating the seemingly heightened political temperatures as short-term but could be seen as trust in Kenya’s democracy and judicial systems.

The resilience is seen in the market capitalisation at the Nairobi bourse, which hit Sh2.54 trillion on Friday (July 4). Although the market is yet to reach the all-time high of Sh2.8 trillion seen in August 2021, the market capitalisation last Friday matched the pre-Covid-19 market cap in December 2019.

It is also a significant gain from Sh1.98 trillion in January this year. NSE has registered similar performance over the last one and a half years. In 2024, all the major NSE benchmark indices registered double-digit growth.

The NSE All Share Index (NASI), which tracks the performance of all listed companies at the NSE, surged by 34.06 per cent while the the NSE 25 Share Index rose by 42.96 per cent and the NSE 10 Share Index climbed by 43.50 per cent.

Between January and June 2025, NASI climbed by 22.41 per cent. The NSE 20 Share Index rose by 18.54 per cent. The NSE 10 Share Index and NSE 25 Share Index gained 14.28 per cent and 13.89 per cent, respectively.

In 2024, the NSE emerged as the best-performing market in Africa in dollar terms, according to the Morgan Stanley Capital International Frontier Markets Index. 

Among the factors that have been at play, nudging the market upwards include a low-interest rate regime, especially in developed markets such as the US, where high interest rates had seen foreign investors withdraw from markets such as Kenya in favour of their home markets. 

Samuel Njihia, Head of Research Sub-Saharan Africa at Renaissance Capital, said other factors that have helped performance at NSE include improving macroeconomic stability. 

“We’re seeing a more supportive backdrop, with relatively low interest rates, stable inflation, a strengthening balance of payments position and a broadly stable currency - particularly against the US dollar,” said Njihia, who added that another factor includes the drop in interest rates on Treasury Bonds and Bills had seen investors increasingly put their money in stocks.

“Importantly, with returns on government securities trending lower, some investors have begun reallocating capital toward equities in search of more attractive yields and long-term growth potential.”

Kenyans had been grumbling about the high cost of living and a government that is insensitive to them. Perhaps the Finance Bill 2024 is what pushed them to the edge, which had proposed numerous new taxes and pushed existing taxes higher and spawned the anti-tax demos last June, forcing President William Ruto to withdraw the Bill.

He further co-opted the opposition into his cabinet. The country has, however, been on edge, which was seen in June this year, when Gen Z demonstrators honouring their fellow fallen youth during last year’s demos were met with brute force, resulting in scores dead and more injured.

Opposition politics, now led by former Deputy President Rigathi Gachagua, has also gone heavy on its criticism of the government and holding rallies, akin to outright campaigns for 2027, something that would have ordinarily caused jitters.

Despite the heightened political temperatures, Njihia noted the market appears to be discounting these developments as short-term noise. 

“Most investors are taking a longer-term view, focusing more on economic fundamentals and corporate performance than on political uncertainty. This resilience reflects growing confidence in the macro-outlook and the belief that recent volatility is unlikely to derail the market’s structural recovery. That said, risks remain,” said Njihia

The political noise is not the only thing that could have scared investors but Kenya’s fiscal health has also not been at its best.

According to Njihia, Kenya continues to face fiscal pressures - including elevated debt levels and revenue underperformance - that could influence future policy direction and investor sentiment.

Externally, he added, the market remains vulnerable to global shocks such as commodity price volatility, and geopolitical tensions, all of which could affect capital flows and investor appetite.

“To rekindle the level of enthusiasm previously seen at the NSE, there’s a need to attract fresh listings - particularly from high-growth and underrepresented sectors - while also repositioning the exchange as a preferred platform for raising capital,” he said.

“In recent years, many firms have bypassed public markets in favour of private placements or debt financing, often due to cost, regulatory burden or limited perceived benefits. Reversing this trend will require rebuilding confidence in the listing process and offering meaningful incentives - such as tax breaks or reduced listing fees - to make public capital raising more attractive and competitive.”

He also noted that NSE needs to figure out how to increase investor engagement with existing market products. These include exchange-traded funds (ETFs),  Real Estate Investment Trusts (Reits), and derivatives, whose uptake has remained relatively low. 

Frank Mwiti, chief executive of NSE said the last one and a half years have seen major milestones not just at the bourse but Kenya’s broader capital markets, resulting in attention from institutional and retail investors, both local and international.

“Given that this year’s gains are building on an already strong base rather than a market rebound from depressed levels, the continued upward trajectory in 2025 points to a deepening of investor confidence and underscores the strength of Kenya’s capital markets,”

He noted that the performance at  NSE has been underpinned by a mix of factors, ranging from internal reforms to broader macroeconomic shifts.

Mwiti said the NSE had implemented reforms aimed at enhancing market depth, efficiency and transparency, generally improving the overall investment climate and restoring investor confidence.

“On the macroeconomic front, one of the most notable shifts has been the stabilisation and subsequent recovery of the Kenyan Shilling, which had faced sustained pressure in prior years,” said Mwiti.

“As currency risk declined, the appeal of Kenyan assets, particularly equities and fixed income securities, increased for both local and international investors.” He also noted that Kenya’s sovereign debt management, including the repayment of a $2 billion (Sh260 billion) Eurobond, eased concerns around external financing and helped stabilise the forex market. 

The Kenyan bourse is also benefiting from lower interest rates - both globally and locally. Internationally, after several rounds of aggressive rate hikes to tame inflation, major central banks such as the US Federal Reserve began signalling an end to their tightening cycles.

Even before rate cuts materialised, forward guidance sparked a global shift toward riskier assets, prompting capital flows into emerging and frontier markets.

Domestically, as the Central Bank of Kenya (CBK) adopted a more measured monetary stance, interest rates on government securities began to ease. This prompted local investors, especially institutional players to rotate capital from fixed-income instruments into equities in pursuit of higher returns, further fueling market momentum.

Mwiti also noted that there has been a steady improvement in corporate earnings across sectors, especially banking, manufacturing and telecommunications, translating to higher dividend payouts and attracting investors.

The NSE boss thinks that investors are seeing the protests and general political noise as short-term. “What we’re seeing is a remarkable level of resilience and continued investor confidence in Kenya’s long-term economic prospects. This confidence is underpinned by strong macroeconomic fundamentals, including stabilising inflation, a stable currency, prudent fiscal management and improving investor sentiment,” he said.

“These factors have helped to anchor investor expectations and sustain capital flows into the market, even amid domestic political discourse.”

He added that NSE has also been strengthening investors’ engagement through such initiatives as roadshows to showcase opportunities in Kenya’s equities market.