Kenyatta Victory Seen as Green Light for Kenyan Markets

The peaceful election of Uhuru Kenyatta as Kenya’s president boosted the shilling, stocks and bonds as investors shrugged off his impending trial at the International Criminal Court and a legal challenge to his win.

The Nairobi Securities Exchange’s All-Share Index surged for a ninth day, rising 3.2 percent to the highest level since June 23, 2009, when Bloomberg began tracking the data. Thirty-eight of the bourse’s 61 members gained while five fell, and the top 10 gainers advanced an average of 8.5 percent. The shilling strengthened 0.9 percent to 85.45 per dollar by 6:45 p.m. in Nairobi, the capital, its strongest since Nov. 16.

The son of Kenya’s first president, Jomo Kenyatta, took 50.07 percent of ballots cast on March 4, enough to avoid a runoff, the Independent Electoral and Boundaries Commission said. Outgoing Prime Minister Raila Odinga, 68, whose father was the elder Kenyatta’s vice president, got 43.3 percent and said he would ask the Supreme Court to overturn the result.

“Investors will have been encouraged by the speech Kenyatta made and the pledge to continue cooperation with the international community, a pointed reference to the ICC,” Razia Khan, head of African economic research at Standard Chartered Plc, said by phone from London yesterday. “The overwhelming factor is that elections went peacefully and even with Raila contesting the results and expressing his faith in the courts, that is really the reassurance investors needed.”

Raila Rejects

Odinga’s rejection of results in the last elections in 2007 triggered violence that led to the death of more than 1,100 people and forced another 350,000 to flee their homes. Economic growth slowed by two thirds to 1.5 percent in 2008 and the shilling fell 18 percent against the dollar that year.

Kenya, the regional hub for companies including Google Inc., General Electric Co., Visa Inc. and PepsiCo Inc., is attracting growing interest from foreign investors, who made half of all stock trades on the Nairobi Securities Exchange last year, compared with 10 percent five years ago. The shilling has strengthened 2.6 percent against the dollar since falling to an intraday low of 88.05 on Feb. 6, its weakest level this year, according to data compiled by Bloomberg.

Kenya’s economy may expand by as much as 6 percent this year, from an estimated 5 percent in 2012, according to the International Monetary Fund. The Nairobi All Share Index gained in the eight sessions through March 8, bringing its advance this year to 22 percent and making it sub-Saharan Africa’s second-best performer after Ghana.

Yields Fall

“The only thing that has changed between this week and last week is that political uncertainty has been sorted out,” Francis Mwangi, head of research at Nairobi-based Standard Investment Bank Ltd., said by phone today. “Barring anything significant happening in the political scene, the outlook remains positive because companies continue to announce their earnings.”

Yields on the 15-year benchmark bond fell one basis point, or 0.01 percentage point, to 12.36 percent today

“The yields were up before elections due to uncertainty,” Fred Moturi, a fixed-income trader at Sterling Capital Ltd., said by phone from Nairobi. “Calmness is returning and lowering the risk premium though the planned petition on the presidential election has risk lingering.”

Court Cases

Kenyatta, 51, will become the second sitting president, after Sudan’s Umar al-Bashir, to face trial at the Hague-based ICC. He and Vice President-Elect William Ruto are accused of organizing and financing militias to carry out murders after Odinga’s challenge to the 2007 presidential election result erupted into two months of ethnic and political violence. Both men say they will fight for their innocence at the court.

The presidential inauguration is scheduled for March 26, depending on when the seven-judge Supreme Court hears the petition Odinga said he will file and makes its decision.

Yields may rise when the Treasury makes its domestic-borrowing requirement known, said Solomon Alubala, head of trading at National Bank of Kenya Ltd.

“What people will then be looking at is how much the new government will be looking for to fund the county governments,” he said.

Kenya’s constitution, approved in 2010, set up a system of government for the nation’s 47 counties as part of a plan to devolve power. The first officeholders for the counties were also elected on March 4.

Volatility Chances

The peaceful passage of the polls “doesn’t mean all uncertainty goes away,” Khan said. Kenyatta’s trial in July is something investors will have to consider, she said.

“I don’t expect it to be a factor, but there will be a chance of volatility,” she said.

Kenyatta, a former finance minister and one of Kenya’s richest men according to Forbes magazine, campaigned on a promise to boost economic growth to between 7 percent and 10 percent a year by 2015 to help create a million jobs annually. He plans to ensure a crude oil pipeline is built from neighboring South Sudan to Kenya’s coast, where a refinery will be built.

He also promised to build a railway from the Mombasa port to Malaba on the Ugandan border and more than double paved roads to 24,000 kilometers (14,900 miles).

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