The rising interest rates in the country are expected to attract more investors towards short-term fixed-income investments in the upcoming 3rd quarter of 2023, Old Mutual Investment Group’s (OMIG) Q2 2023 Economic Outlook has revealed.
Published for the second time this year, the outlook is a quarterly OMIG Kenya Investments Discussion Forum on the prevailing macroeconomic environment and its influence on available investment options for both retail and institutional investors.
Speaking during the forum, Old Mutual Investment Group (OMIG), Group Managing Director for E.A, Mr. Anthony Mwithiga said, “Investors would be looking at investing in instruments which provide higher current returns such as Money Market Funds and other short-dated interest-bearing securities because they mature quickly and allow an investor to re-invest the proceeds on a higher interest rate bracket”.
“It is better to get 12 percent for a 91-day investment than 13 percent per year for a 20-year investment, you get more of your return sooner”, Said Mr Mwithiga.
“While investors should expect higher returns from short-term securities, the outlook reminds investors in long-term securities to expect volatility on their historical longer-dated fixed-income investments like bonds, whose value may fluctuate downwards due to increased interest rates”, he added.
Speaking at the forum, Old Mutual Investment Group (OMIG) Kenya, Head of Research and Listed Equities Mr. Steven Maleche said in the short term, investors need to invest in short-term interest-earning assets. In contrast, for the long term, investors need to look at growth assets like equities, even though more volatile, are likely to compensate for rising inflation. The current stock market valuations are much lower than have been seen over the past 5 years despite the positive performance from firms in the Telecommunication, Banking, and Manufacturing sectors.
“This is a year of looking at the absolute performance, so investors are looking at where positive returns can be made”, said Mr. Maleche.
To diversify, the investment outlook challenged Institutional investors to embrace Alternative Investments, which tend to be negatively correlated to traditional investments like equities and bonds.
Alternative Investments include, among others, investments in infrastructure, agriculture, healthcare, and education that can sustain returns in volatile periods because of stable contractual obligations, long-term nature, and steady demand for the services.
“The best investment is not in a single security, but in a combination of different investment securities across several asset classes which can meet investor risk tolerance and return expectations over a long-time horizon”, said Maleche.