Kenya drops 4 points in latest Africa financial market index report
Kenya’s overall performance slipped from the top ten in capital markets ranking in Africa.
The report measured the openness and attractiveness of African countries’ financial markets to foreign and domestic investment, using data from central banks, securities exchanges and international financial institutions.
According to the fifth edition of the financial markets index by Absa Africa, Kenya dropped to position 11 from position seven last year, scoring 47 points out of 100, the lowest in five years.
Neigbouring Uganda ascended five positions to close the top 10 categories in the continent.
Absa Group chief economist Jeff Gable said the index looked at 23 countries across the continent and showed how they could improve their capital market frameworks to bolster local and international investor access and sustainable growth.
“South Africa’s strong performance across pillars was hampered by economic growth. It scored full points on the sixth pillar, which calculates the enforceability of standard master agreements, and also scored higher than all countries on market depth and access to foreign exchange pillars. However, it scored relatively low – at 77 – on capacity of local investors and macroeconomic opportunity,” said gable.
Other pillars that determined the rating are tax and regulatory environment, capacity of local investors, macroeconomic opportunity and legality and enforceability of standard financial markets master agreements.
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Of these, Kenya dropped positions in five out of the six pillars, with its foreign exchange regime coming into focus again.
It was established that many countries had weaker foreign exchange reserves positions relative to net portfolio investment.
South Africa, Mauritius and Nigeria maintained the top three positions but on reduced scores, an aspect attributed to methodological changes adopted to better reflect country performance and evolving trends in financial markets.
The report further indicated that the liquidity pulled down scores, with new waves of the coronavirus pandemic affecting market confidence and turnover ratios.
Research showed that African financial markets endured another difficult year, with illiquid markets continuing to reduce scores due to the COVID-19 pandemic.