Standard Chartered 2026 outlook sees investors rally behind emerging markets

Standard Chartered branch on Kenyatta Avenue in Nairobi. [File, Standard]

Kenya and other African markets are poised to attract increased investor interest in 2026 as capital shifts toward emerging market assets, according to Standard Chartered's annual investment outlook released on Thursday. 

The bank's Wealth Solutions Chief Investment Office, in its Global Market Outlook 2026, highlighted a growing preference for emerging market (EM) bonds and assets, driven by attractive yields, improving credit quality, and diversification needs as developed market valuations remain high.

"Emerging Market bonds, both US dollar and local currency, are expected to outperform Developed Market bonds in 2026," the report stated.

It noted that an anticipated easing of global monetary policy and potential US dollar weakness could support capital inflows into markets like Kenya, boosting commodity prices and enhancing returns on non-US assets.

The outlook identifies a structural opportunity for African sovereign and corporate debt as global portfolios reposition.

It also points to the growing influence of long-term capital from regions like the Gulf, invested through sovereign wealth funds into infrastructure, technology and sustainable sectors.

"Investment from Gulf countries is long-term and carefully planned. This type of patient capital offers useful lessons for Africa," said Standard Chartered Bank's Head of Affluent and Wealth Management for Kenya and East Africa Paul Njoki. 

For Kenya, the report reinforces the case for diversified investment strategies that balance global growth opportunities with income-generating assets and exposure to commodities. 

Standard Chartered's investment strategy for the year centres on three themes: equities in markets like the US and Asia ex-Japan, income from outperforming EM bonds, and diversifiers including gold and select currencies. 

As global investors seek resilience and income, the report concludes that Africa’s improving macroeconomic fundamentals and demographic trends position the continent to attract sustained capital flows in the year ahead.

The report says that while global equities continue to be influenced by artificial intelligence and technology-led growth, the current cycle differs from past market booms, creating room for more balanced and diversified investment strategies.

For African economies such as Kenya, the trend towards emerging markets underscores the growing relevance of sovereign and corporate debt markets as global investors reposition portfolios in anticipation of easing global monetary policy and a weaker US dollar.

"Historically, periods of dollar weakness have supported capital inflows into emerging markets, boosted commodity prices, and enhanced returns on non-US assets," said the bank. 

Globally, the Standard Chartered CIO expects risky assets to perform well in 2026 as major asset classes continue to inflate.

Inflating gains are expected to be accompanied by greater dispersion, resulting in the CIO’s preference to diversify across a wider range of asset classes centred around three key themes.

Some of the risks outlined by the bank include a negative shock or disappointment relative to high expectations in the AI theme which poses a risk to equity markets, and a credit event that leads investors to worry that default risk is systemic, rather than idiosyncratic, poses a risk to both equities and credit, across private and public markets.

"Any data or event that limits the Fed’s ability to cut rates poses the risk of disappointing markets and triggering a reassessment of valuations. Also, an unexpectedly hawkish Bank of Japan that pushes Japanese yields and the JPY sharply higher would pose a risk to equities and corporate bonds," the outlook adds.