Kenya violence to push investors away
Rioting, political instability and a spiraling death toll following Kenya's disputed election is seen drastically denting investor confidence in what had been seen as one of Africa's emerging success stories.
Scores of people have been killed in turmoil since President Mwai Kibaki was declared the victor on Sunday with a narrow majority. The opposition says the poll had been stolen and European Union monitors say it lacked credibility.
Kibaki had been credited with turning around east Africa's biggest economy from disaster to an average 5 percent growth since 2002, and the country's success had been held up as an example of a wider trend in Africa.
The Kenyan shilling is up 9 percent versus the dollar this year. Fitch and Standard & Poor's have issued the country debut credit ratings of 'B+' citing its diversified economy which is expected to grow 7 percent in 2007.
But now investors are likely to be less keen.
"The events in Kenya will frustrate some people as it is one of the African markets that investors have been focusing on in their hunt for new markets," said Beat Siegenthaler, chief strategist at TD Securities in London.
"There are not that many countries in Africa with decent market infrastructure and Kenya happens to be one of them. This will serve to remind people that it is not straightforward to invest in emerging markets."
Kenyan markets are closed for the New Year and will not reopen until later this week, but both the stock market and shilling currency are likely to fall sharply. How much will depend on how long the violence continues, analysts say.
"Obviously it is extremely negative," said strategist Richard Segal at Renaissance Capital. "We don't know when the markets will open but certainly people will be looking to sell."
He said the violence and television pictures of burning buildings and riot police would probably hit interest in the planned sale of 25 percent in telecom firm Safaricom SCOM.NR.
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