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Kenya's Eurobond may suffer from emerging markets gloom

Apr 13, 2016

The timing of Kenya’s Eurobond issue may be impacted by bad investor sentiments if it coincides with downgrade of South Africa’s credit worthiness.

                                        

Treasury Cabinet Secretary Henry Rotich was in London last week to meet investors in what was billed a "non-deal" roadshow, but Reuters reported that Kenya may return in May for a roadshow bond. South Africa, which also held a global conference call with investors on Wednesday for a potential 10-year dollar bond is facing a major downgrade of its bonds to ‘junk’ status the level below which bonds have a higher risk of not being repaid.

CfC Stanbic Bank Regional Economist, Jibran Qureishi said Tuesday that Kenyan debt risks a negative outlook given that investors see Africa as one block. “The credit downgrade may affect Kenya because investors see South Africa as a barometer of liquidity in the continent,” he said at a media briefing of the East African Trans-Regional conference in Nairobi.

Mr Alykhan Satchu, chief executive of Rich Management however said; "I think the South Africa downgrade is largely priced into South African assets. The Eurobond markets have become more discerning about Sub Saharan Africa credits and this is exemplified by for example Kenya's startling performance since hitting a high yield of 9.8pc in January after which the 10 Year rallied in a straight line to below 8pc".

African bonds

"My view is the government of Kenya will sell a small sized issue about $600m leaving demand intact. The 10 year will sell for a yield around 8pc.

This will be an important signal around Kenya being one of the sub-Saharan Africa winners at a time where growth is screeching to a halt elsewhere and confirmation that capital markets remain open for Kenya," Mr Satchu said. 

 

Credit: Daily Nation Kenya

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