Sanlam Investments East Africa Limited (SIEAL) has today released their 2024 Investment Themes and Outlook report. In 2024, SIEAL projects an improving global macroeconomic backdrop as global monetary policy becomes more accommodative.
We expect the below themes to take center stage in the year: Geopolitics & Elections, Forex Liquidity, and Fiscal & Monetary Policy Reform.
Mr. Shritesh Nanji, Chief Investment Officer – Investments, noted that “Global equity markets performed strongly with developed equity markets increasing 21.8% in 2023. Emerging markets by 7%. Global GDP growth projections for 2024 are expected to be broadly similar to 2023 at 3%, with Sub-Saharan Africa growth expected to pick up from 3.3% to 4.0%. Conditions for Africa are improving with countries receiving additional support from international agencies like the IMF and World Bank.”
“We expect the external funding environment to improve, for example, Ivory Coast is looking to issue the first Eurobond in Africa in around 2 years. Valuations are attractive with equities trading significantly below historic averages. Catalysts to improve returns will include investor confidence in foreign currency availability and fewer concerns regarding Africa debt sustainability.” – Mr. Shritesh Nanji – Chief Investment Officer – Investments.
At the report release, Mr. Dan Gathogo noted that interest rates on Kenyan government securities rose sharply in 2023. SIEAL expects interest rates to remain elevated in 2024 driven by the increase of the Central Bank rate in December 2023, the funding requirements of the government, and a lag in tax collection. “We expect the shilling to depreciate in 2024 but face less pressure than 2023 as the Central Bank of Kenya has increased interest rates and US interest rates are projected to decline.”
As uncertainties around Kenya’s repayment of its 2024 Eurobond ease, coupled with less restrictive monetary policy globally, this could see improved sentiment from foreign investors towards Kenyan Equities trading at historically low valuations. On Real Estate, the continued weakening shilling and higher interest rates could slow construction activities in the medium term. However, rental assets in defensive sectors such as education and health could still enjoy rental escalation despite inflationary pressures.
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