Treasury secretary Henry Rotich. FILE PHOTO | NMG
Summary
- Investment managers at Zamara say bank stock prices at the NSE are likely to go up further on the expectation of higher margins should the rate cap be reviewed.
- Other companies are also likely to enjoy the knock-on benefit of improved credit flow to the private sector.
- Pension funds returns hit an average of 18 per cent last year on the back of a recovery in the equities market, defying a tough economic climate.
Pension funds returns are likely to enjoy a boost through
equities and fixed income with the expected review of the interest rate
cap, a fund administrator has said.
Investment managers
at Zamara say bank stock prices at the NSE are likely to go up further
on the expectation of higher margins should the rate cap be reviewed,
while other companies are also likely to enjoy the knock-on benefit of
improved credit flow to the private sector.
President
Uhuru Kenyatta last week in London said the policy has failed to
increase credit to traders. Subsequently, Treasury CS Henry Rotich has
disclosed he will submit amendments on the law to Parliament in June
through the Finance Bill.
Pension funds returns hit an
average of 18 per cent last year on the back of a recovery in the
equities market, defying a tough economic climate.
“Anticipation of a repeal has already began to have a positive
impact on the market, and while it may not be as strong a year as 2017,
definitely it augurs well for the equities,” said Zamara chief
operations officer Chris Nyokangi during the launch of the firm’s
pensions performance watch 2017 yesterday.
“For fixed
income, the cap has also limited the rate which banks can offer for
deposits. If they are able to lend at a higher rate, it should also
translate to an increase in the returns depositors are able to get from
their cash held in banks.”
Last year, returns from
equities investments for 374 schemes surveyed by Zamara stood at an
average 30.4 per cent compared to -9.6 per cent in 2016, when the market
was in the grip of a bear run.
Fixed income returns
rose to 14.7 per cent from 14.3 per cent in 2016, while those of
offshore investments jumped to 22.2 per cent from 1.2 per cent.
The
movement of rates on government securities in the event of a rate cap
review would be of importance however, given the inverse relationship
between the price (value) of bonds and yields.
Pension funds have invested 70 per cent of assets in fixed income, a significant share being in government securities.
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