Kenyan Currency Value Bleeds on Against Peers as MSCI Denies Local Companies Entry

The Kenyan Shilling (Ksh) is experiencing significant fluctuations in its exchange rate against other East African Community (EAC) currencies.

As of August 1, 2023, USD could buy 3,608.4 Ugandan Shillings (UGX) and 2,454 Tanzanian Shillings (TZS), with the KES-UGX exchange rate of 0.04029 translates to 25.80 UGX for one Ksh.

Since March 2020, the UGX and TZS have gained 29.5% and 24.1% against the KES, with the Ksh trading at 17.30 TZS.

The depreciation of the Ksh against EAC currencies is affecting Kenyan exports and imports, affecting profit margins for businesses involved in regional trade.

The Ksh’s strength is indicated by its performance against the USD, with one USD equivalent to Ksh.153.10 as of November 2023.

The USD rate is crucial as it serves as a benchmark in international trade.

The performance of the Ksh against other EAC currencies can be indirectly influenced by the strength or weakness of the USD.

The Ksh’s trading performance against other EAC currencies, considering USD, presents a complex picture.

More Setback for Investors in Kenya

Morgan Stanley Capital International (MSCI) has denied Kenyan companies entry into its global stock market platform due to dollar shortages and financial turbulence.

The firm halted its operations in Kenya due to a decline in forex market liquidity, posing challenges for foreign investors in repatriating capital.

“In light of currently observed market accessibility issues, MSCI will not implement changes as part of this Index Review for any securities classified in Bangladesh, Egypt, Kenya, or Nigeria…” said the MSCI.

The MSCI Kenya Index tracks three Kenyan blue chips, Safaricom, Equity Group, and EABL, exposing them to foreign investors who often dominate trading on these counters.

KCB Group is listed in the MSCI Frontier Markets Small Cap Index, despite meeting criteria, as the review moratorium prevents other listed firms from joining.

Periodic reviews, conducted quarterly in February, May, August, and November, enable the introduction or removal of constituent companies and their weighting within the index.

The Nairobi Securities Exchange’s (NSE) status review provides foreign investors with a current view, enabling informed investment decisions, but a freeze discourages foreign inflows due to market caution.

The review will also affect Bangladesh, Egypt and Nigeria