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Recent Topicals

Nairobi Metropolitan Area Residential Report 2017

Sep 4, 2017

Last year, we released a report that covered the mortgage and rental affordability of the residential sector, called Nairobi Mortgage and Rental Affordability Report. According to the report, most sub-markets were unaffordable to prospective home-owners with an average mortgage affordability index of 66, whereas most markets were affordable to the renters with an average rental affordability index of 132, where index scores of 100 and above indicate affordability. This year, we conducted research on 35 sub-markets in the Nairobi Metropolitan to determine the investment opportunity for residential developments in 2017. This report shows the performance of both apartments and detached units in the 35 sub-markets. We start with an introduction, then cover the performance summary by sub-markets and conclude by establishing where the investment opportunity lies by ranking the sub-markets using various metrics. Introduction The residential real estate sect...

Corporate Governance and Stock Performance

Aug 27, 2017

Corporate governance is the application of best management practices, compliance with laws and regulations and adherence to ethical standards for effective management and distribution of wealth and discharge of social responsibility for sustainable development of stakeholders. Good corporate governance is essential for the vibrancy and efficiency of any financial market. Over the years, we have seen vast financial losses, both globally and locally, partly attributable to poor corporate governance structures and oversight. This focus note aims to first highlight the need for good and sound corporate governance, and point out examples of firms where poor corporate governance has led to investor losses. We then aim to conclude by demonstrating that proper corporate governance structures do have a correlation to stock market performance, but requires the input of all market participants and stakeholders, drawing lessons from the US market, where proper corporate governance has...

Post Elections Areas of Focus

Aug 20, 2017

In our report before the Kenyan 2017 General Elections, Post-Election Business Environment, & Cytonn Monthly – July 2017, we highlighted our expectation of the immediate business environment post-elections. Our conclusion was that we expect the post-election business environment to remain largely peaceful and non-violent. This expectation was driven by the changes and reforms we had seen in our electoral process in the years leading to this past election, the circumstances and indicators leading to the election. Specifically; Integrity and independence of the electoral body was better than before. For example, in this election, biometric voter identification worked, while at the last election this functionality failed, Integrity and independence of the judiciary, Election preparedness was generally better than befo...

Focus of the Week: Portfolio construction and diversification

Aug 13, 2017

As investors, we all want our investments to grow and deliver higher risk adjusted returns despite the prevailing economic environment brought about by the cyclical nature of investments markets due to varying macroeconomic factors like politics, inflation, country growth and others. For long-term successful investment, it is important for an investor to have and adhere to an investment plan, and one fundamental pillar of that plan should be an asset allocation that ensures portfolio diversification, and which is aimed at attaining the investors’ objectives. So how do we go about constructing a diversified portfolio? To start off, we first have to consider an analysis of the investor’s investment objectives and constraints in order to inform the investment strategy. This planning step involves taking a number of factors into consideration, but primarily the following 7 factors: Risk: This is the probability that an investment may...

Post-Election Business Environment

Aug 6, 2017

On 8th August, 2017, Kenyans will take to their registered voting stations to elect their Government, in what will be Kenya’s 6th General Election since they adopted a multi-party system, and the 2nd General Election under The Constitution of Kenya, 2010. The Kenyan General Elections, 2017, is shaping to be a unique election for four main reasons: It has the highest number of contesting candidates at 16,259 compared to 12,400 in 2013, It is definitely the most hotly contested election in our history, so it raises the stakes, and from recent surveys, it is very closely contested, with the latest IPSOS polls placing Uhuru Kenyatta at 47% and Raila Odinga at 44%, and the latest Info track poll placing Uhuru Kenyatta at 48% and Raila Odinga at 48%, It is the most expensive election ever held with Kshs 49.9 bn expected to be expended by the electoral body, up from Kshs 35.0 bn in 2013, as per the Pre-Elect...