- Lessons and Implications of the Confirmation of Charges Against Kenya's 'Ocampo Four'
- Finance Minister Quits Over ICC Charges
- Shortage of HIV Test Kits Raises Concerns
- Living On the Edge in Turkana Region
- Ali Breaks Silence, Describes Delight At Acquittal
- Uhuru, Ruto Eligible for Presidency - CIC
- Tea Sector Posts Record Earnings in 2011
- Resettle IDPs, Urges Annan
- Uhuru, Muthaura Have Done the Right Thing
- All Displaced People Should Return Home
- Concern Raised As Parents Shun Schools in Poll Violence Hotspots
- Ruling On IEBC Hiring in February
- Country Working Towards Conditions Needed for Direct Flights to U.S.
- How ICC Claimed Kibaki's Lieutenants
- Geothermal Project to Receive Sh10 Billion Funding Boost
- Five Million to Get IDs Before Elections
- Speed Up Building Port
- Uhuru and Muthaura Did Well to Quit Posts
- A Full Plate Awaits Githae
- Clashes Continue in Moyale
- Baraza Case to Be Heard Monday
- Two Firms in Joint Venture to Drill for Oil Near Lodwar
- Exit Uhuru, Muthaura
- ICC Charges Hound Uhuru Out of Treasury
- Consumers Grow Despite Inflation
- Poor Relations Between Banks Blamed for Cash Shortages
- Fish Prices Up As Vegetable Supply Dwindles
- Consumers to Pay More for Milk and Bread As Prices Rise
- Kibaki Tasks Ex-Dar CJ to Lead Probe in Kenya
- Mombasa Port Cargo Congestion Forces Three-Month Fees Waiver
5 January 2012
From a macro-economic standpoint, 2012, will be a year to mourn or prosper depending on how well hedged investors are.
Ms. Razia Khan's article at the end of the year was bang on in as far as how vulnerable the economy will be in 2012.
The shilling is still recovering from its brutal slip in the last half of 2011, thanks to the Monetary Policy Committee's directive on a higher base rate.
Inflationary pressure will ease but we tend to forget that inflation is a symptom of a deeper disease: our total lack of preparedness in the wake filled world that is today's global finance.
We are running a huge and ever expanding deficit, thanks to a very inefficient and in my opinion too large a government.
Our big trade partners are in the doldrums and of course, we feel the pinch too.
We are in the process of devolving power, which means we will be spending quite a bit. We are yet to adequately address our energy issues; and a war in Somalia that has no financial accountability.
Not to mention a very short memory in as far as food and commodity sustainability is concerned.
Additionally, we have the biggest roll of the dice coming up later on in the year, the general election, whose outcome cannot be predicted. Furthermore, few of the emerged candidates are talking economics, making the markets uneasy.
Therefore, this year, conventional fund managers looking for better than inflation rate returns locally will face a challenge.
This is because in my prediction, the equity market will dry up. We have already seen foreign investors taking up almost a billion shillings out of the market running up to the end of the year. Not to mention the slump that was 2011.
This will continue for the rest of the year.
Interest is at all- time high and will slow down trade and manufacturing. Slow legislation, especially this year, will remove any hopes of trying to find alternative regulated credit products.
The last source of hope, Government of Kenya paper, is not as shiny anymore even with the very attractive rates that are currently being offered.
This is a non-intended consequence of the slow action by the Monetary Policy Committee to rein in the shilling.
Over the coming months, we will see the market asking for similar yields at the auction and almost zero liquidity in the bonds as with time, the anticipated political risk is going to be priced in.
In turn, this lack of liquidity will similarly be priced in the quotes at auction time, in a self-fulfilling prophesy.
So what your financial advisor should tell you is to try to retain as much cash as possible in the coming months, to pay off as little debt as possible, to avoid refinancing and to invest with a longer time horizon.
On the investment side, your fund manager, will tell you she is trying as hard as possible to keep your money out of the red zone.However, it's not all gloom.
Alternative investment arenas are plenty for those with brave hearts, especially in the SME sector.