Investors too busy cheering Kenyatta to fret about vote spat

Euphoria over a President Uhuru Kenyatta win boosted Kenya’s stocks by the most in Africa and sent Kenya’s dollar bonds higher.

The FTSE NSE Kenya 25 Index of stocks on Thursday advanced as much as 2.7 per cent to the highest level in two years. The yield on the nation’s Eurobonds due 2024 fell the most since March and the shilling was little changed.

On Friday, the bourse closed the week on a high note with a total of 1.4 billion shares traded against 207 million posted Thursday. The NSE 20 share Index surged by 201.09 points or 5.33 per cent to stand at 3976.98.

With ballots from more than 97 percent of polling stations counted, Kenyatta has secured 54.3 per cent of the vote, while his main rival, Raila Odinga, has 44.8 per cent, according to the Independent Electoral & Boundaries Commission’s website. The opposition rejected the results, with Odinga insisting the counting system had been hacked.

“The markets are seeing this accusation of massive hacking as a red herring,” said Aly-Khan Satchu, who runs Nairobi-based Rich Management, an adviser to companies and wealthy individuals. “There is no smoking gun and hence the positive reaction. President Kenyatta and Kenya’s free market credentials are burnished by what was a very well-conducted election and I expect a serious upwards rerating at the stock exchange. The shilling will remain robust.”

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A Kenyatta win would soothe investors who fear a shift to more leftist economic policies under Odinga, Exotix Capital said in a note to clients. Kenya is one of sub-Saharan Africa’s five largest economies and a regional hub for companies such as Google Inc. and Coca-Cola Co.

Since Kenyatta took office in 2013, the economy has grown an average of 5.7 percent. His party’s election manifesto pledges to continue implementing policies that support growth through increased industrialisation, improved trade links and more private investment.

Potential Unrest

Markets shouldn’t write off the chances of unrest in coming days, according to Capital Economics Ltd. Accusations of fraud raise the risk of violence and riots, similar to when Odinga lost to then-President Mwai Kibaki in 2007 and disputed the results.

“While the opposition leader has appealed for calm, he has also explicitly denied responsibility for any actions undertaken by his supporters,” John Ashbourne, an Africa economist at Capital Economics, said in a note to clients.

If riots start, Kenya’s tourism and agricultural exports would suffer, knocking about 3 percentage points off economic growth in the third quarter, he said. The country is the world’s largest exporter of black tea.

The shilling traded at 103.98 per dollar by 7:52am in Nairobi on Thursday. The Shilling was steady on Friday, with slow activity in the market. Reuters reported that at 0920 GMT, commercial banks quoted the shilling at 103.90/104.10 to the dollar, unchanged from Thursday’s close.

The yield on the dollar bonds closed 19 basis points lower at 6.29 percent in London on Wednesday, while Kenyan stocks ended the trading day 1.4 percent higher.