This archive report was first published on 31 October 2019.
On October 31, 2019, the Nairobi Securities Exchange (NSE) witnessed a significant surge in banking stocks, resulting in a substantial increase in the portfolios of insurers with substantial investments in lenders.
The market value of publicly-traded banks rose by more than Sh50 billion in two weeks, following the government's decision to repeal the control of lending rates.
Investors are bidding up bank stocks, anticipating the policy change to widen lenders' profit margins by allowing them to charge higher interest on relatively riskier borrowers.
Kenya Re, Britam Holdings, and Old Mutual Life Assurance are among the insurers benefiting from their holdings of bank stocks.
For instance, Britam holds approximately 297 million shares of Equity Group, whose share price jumped 6.5 percent in yesterday's trading alone to Sh43.1, resulting in a paper gain of Sh787 million for Britam.
Similarly, Kenya Re has 18 million shares of Co-op Bank, whose stock rose 6.8 percent to Sh13.3, while Old Mutual holds 9.2 million shares of KCB, whose stock also rallied 6.8 percent to Sh48.1.
The rally in shares of banks and Safaricom could spread to the broader market, benefiting insurers whose earnings tend to swing in line with market cycles.
