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Recent Topicals

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Analysis of listed Insurance Companies in Kenya

Nov 8, 2015

Cytonn Investment has completed an analysis of all listed insurance companies in Kenya, which aimed at assessing the attractiveness of both the insurance sector and the specific listed insurance companies, which we officially released on 2nd November 2015. As part of increasing our listed equities coverage, we turned our attention to the insurance sector. In our analysis of listed insurance companies, we seek to recommend to our investors which insurance companies are the most attractive for purchase, and stable from a franchise value and from a future growth opportunity perspective.In Kenya there are a total of 50 insurance companies, 3 reinsurance companies, 198 insurance brokers, 4 reinsurance brokers and 5,155 insurance agents. Kenya’s insurance penetration stands at 3.0% compared to its peer-countries in the Sub-Saharan Africa region. Kenya has remained under-tapped in insurance, particularly within the middle to low-income bracket, which still remains informa...

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The Interest rates environment in Kenya

Oct 25, 2015

Interest rates on Government securities in Kenya have been on a steep upward trend and we have also seen the high rates passed on to bank customers. In a report by Business Daily this week, some customers have had as high as 12% revision in their bank rates and some being charged high rates of up to 27%.After covering the impacts of a high interest rates environment on the Kenyan economy, and the corresponding impact on investments in our Cytonn Weekly Report #38; this week we turn our attention to the key factors that determine the direction of interest rates in an economy, and which of these factors resulted into the high interest rates environment we presently have in Kenya, and finally we address what we need to do in terms of policy action to contain the volatile interest rates environment.Interest rates in an economy are determined by the below factors: ...

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Enabling the Diaspora to Contribute to Economic Growth

Oct 18, 2015

Last week we covered the importance of Diaspora to economic growth. This week we focus on how we can make it easier for the Diaspora to contribute to Kenya’s economic growth. The potential contribution of the diaspora to a country’s development goes beyond personal remittances. These contributions range from knowledge exchange, increased trade links, and better access to foreign capital. It is estimated that the African Diaspora save USD 53.0 bn annually, most of which is invested outside Africa and could be potentially mobilized for Africa via various investment instruments such as diaspora bonds.The aim of this piece is to understand different ways - through investments, trade links, skills and technology - how diaspora resources can potentially be mobilized for the development of Kenya. Diasporas contribute to their home country through (i) intellectual capital, (ii) financial capital, (iii) political capital, (iv) cultural capital, and (v) social capital. In our Cytonn

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Diaspora Importance to Economic Growth

Oct 11, 2015

A diaspora is a group of people, similar in heritage and origin that have migrated out from their homeland, but still maintain a significant interest and connection back home. According to the United Nations, over the last 45 years, the number of persons living outside their country of birth has more than tripled from an estimated 75 million in 1960 to over 231 million in 2013, representing 3% of the world’s population. Out of this, 18.6 million are from Africa.In this investment opportunity focus, we wish to highlight the importance of the diaspora, their location, needs from an investment perspective, challenges when it comes to investment in Kenya, how private sector players such as Cytonn can position to be their trusted partner, and the ultimate benefits to the Kenyan economy. However, it is first important to showcase a country that has done well based on the effect of their diaspora, and we wish to showcase India.Diaspora remittances...

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The impact of high interest rates on the Kenyan economy and Investments.

Sep 27, 2015

With the recent developments in Kenya’s interest rate environment i.e. (significant increase in yields on government securities and bank deposit rates), the key question in every investors mind is how this will impact the economy and the investments environment in the country. This week the government issued a 1-year bond at a yield of 19.1%, and the 91-day T-bill was at 18.6%. It is evident that interest rates have significantly moved higher in the recent past and we expect an increase across all tenors and this will be passed through to the rest of the economy e.g. bank loans. The last time such an interest rate environment was witnessed was in 2011; then the 91-day T-bill peaked at 20.6%. In 2011 the high interest rates had been driven by the weakness in the currency coupled with the high inflation rates where inflation rate reached a peak of 19.7%. The chart below shows a 5-year trend analysis of interest rates and inflation and of note is that in the current...

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