Emerging markets not attracting enough foreign fund flows

Investment brokers on the Trading floor of the Nairobi Securities Exchange (NSE). FILE PHOTO | NMG. 

By PAUL MUTHAURA

Summary

• Kenya should refocus its energies on improving its regional and even continental standing as an investment destination of choice.

Amid an aggressive global pursuit for yield and where substantial funds are currently settling for negative returns, the publication of the Barclays Africa Financial Markets Index provides opportunity to assess why those flows are not coming to Africa despite its huge infrastructure funding needs and high returns available on even lower risk sovereign debt.

The index provides timely analysis on factors to address to build a more effective link between available pools funds and investment opportunities.

The Barclays Index further challenges us to analyse why that capital raising is happening in London rather than on the African continent and what elements need to be addressed to ensure that the local capital markets will be better placed to proactively support economic and regional economic growth.

The authority backs the view that expanding and deepening financial markets across Africa is a central theme in the next stage of the continent’s development

Therefore, together with the Kenyan capital markets industry, we are seeking to proactively respond to the expectations of both local and international investors seeking to seize the opportunity and take advantage of the continent’s dynamic markets that present above-average opportunities for investment growth.

Yield demands as well as investment flow levels are heavily influenced by the perception of risk and which have been exacerbated by the de-risking pressures arising from regulatory reform post the global financial crisis.

In this context, ensuring access to reliable and robust information on the actual state of African financial market development is potentially just as important as implementing appropriate local policy and regulatory reforms in addressing the real or perceived risks of investing in Africa.

We laud the Barclays Africa Group for this initiative as the consistent publication of market data that highlights the continent’s ability to tap into local and global savings pools can only serve to accelerate productive investments that contribute to sustainable domestic employment creation and help generate income to improve the welfare of its people.

The metrics identified serve as key measurable indicators for comparing performance but also aid in influencing decision making by international investors, on their choice of markets to invest.

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We are encouraged that the findings of the first Index Report have to a large extent validated the key priorities as set out in the Capital Markets Master Plan.

The Capital Market Master Plan envisions that the Kenyan capital markets will become sufficiently deep and dynamic to stimulate domestic development, while simultaneously providing a gateway to Middle Africa for regional and international capital flows.

By 2023, it is seeking to ensure that Kenya will have been transformed into a choice market for domestic, regional and international issuers and investors.

We acknowledge that the significant efforts and the strides being achieved on the transformation of our financial markets through the 10-year Capital Market Master Plan have not been communicated as effectively as possible.

We believe that Kenya’s capital markets can leverage on the findings and recommendations of the Barclays Financial Markets Index to refocus our energies on improving our regional and even continental standing as an investment destination of choice.

Paul Muthaura is CEO, Capital Markets Authority.