Blue-chips target Sh1bn new capital on key index shift Equity-centre

Equity Bank headquarters. FILE PHOTO | NMG

By CONSTANT MUNDA
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Summary

• The analysts estimate some $12 million (Sh1.3 billion) of frontier markets-focused funds which were in Kuwait’s market will be redirected to Kenyan firms in the global index which are closely watched by global investors.
• Equity Group Holdings, Kenya’s second largest lender, has been tipped to get the lion’s share of portfolio re-allocation targeting Nairobi upon exit of MSCI Frontier Markets 100 Index.

Kenyan blue-chip firms may attract more than Sh1 billion in fresh capital inflows in about a year’s time on adjustments to a key global index tracked by investors, analysts said.

Analysts at Egypt-based investment bank, EFG Hermes, say next month’s upgrade of Kuwait equities to the Morgan Stanley Capital International (MSCI) main emerging markets index will turn investor attention to Kenyan blue-chips, a move that could trigger billions of shillings of inflows from passive funds.

The MSCI, the world’s largest market index provider, will from next month (November) begin phased reclassification of the Kuwait stock market bourse — which currently accounts for more than a quarter of frontier markets index — in a year-long process through five stages.

This shift means that Kenya’s weight in the index will increase to 9.49 percent from current levels of about 8.2 percent after Kuwait fully exits in a year’s time, according to this month’s simulation by MSCI.

This will make Nairobi the fourth most important frontier market in the global listing after the biggest gainer Vietnam (28.76 percent), Romania (12.47 percent) and Morocco (10.26 percent).

The analysts estimate some $12 million (Sh1.3 billion) of frontier markets-focused funds which were in Kuwait’s market will be redirected to Kenyan firms in the global index which are closely watched by global investors.

Equity Group Holdings, Kenya’s second largest lender, has been tipped to get the lion’s share of portfolio re-allocation targeting Nairobi upon exit of MSCI Frontier Markets 100 Index.

“There could be a good opportunity in names like Equity Bank if that money that was in Kuwait is reallocated to Kenya and people start looking at names where they are under-weight or don’t have a shareholding,” head of equities at EFG Hermes Kenya Muathi Kilonzo said on phone.

The MSCI Frontier Markets Index currently tracks performance of Safaricom #ticker:SCOM, Equity #ticker:EQTY, KCB #ticker:KCB, East African Breweries #ticker:EABL, Co-op Bank #ticker:COOP and BAT #ticker:BAT in Kenya.