US has a President who works...we have a President who......

I am certain there are several other factors which may make investors stick to the US at 1% compared to the treasury bill rates of ~8% and bonds rates of around 12% in Kenya.

The most immediate one is our flagile political system with it's risks. A successful referendum and 2012 elections would see our interest rates going down. The other issue is baseline inflation, whereas most countries maintain it below 2% ours is always above 7% at best meaning you have to have a yield of more an 5% in investments to stay above water. The third issue i can think about are xchange rates. If someone huge like Warren Buffet brought a significant amount of money to invest in Kenya, the kenya shilling would also gain agaisnt the dollar meaning that, all things remaining constant, they would lose out when getting out of the market.

But i am certain the most important factor why they dont invest here is lack of information. Do you think so?

The USA can PRINT money... which is what is happening...
If Kenya does the same... then we will stoke inflation...

If you tell a Kenyan, ati 1% for T-Bills... they will put it into other sectors (possibly) stoking inflation...

I think the GoK is overpaying (12.5% net of all taxes) for the Infrastructure Bonds. They could have paid 8% (tax-free) & gotten all the cash they wanted!

nigerian bonds are denominated in naira...the nigerian market is much more liquid and transparent than kenyas...kenyas market has 2 many structural flaws to attract offshore flaws..case in point the 15pct witholding tax on interest

@kizee. I meant to say that a foreigner told me that he'd rather by certain bonds in Nigeria that were dollar-denominated and offered rates at about 18%. This was about a year ago during the 1st IFRB. I don't know if things have changed.
What's your problem with withholding taxes exactly? I think we need them, perhaps your thinking of a lower figure.

As for the structural flaws in the Kenyan system...I remember you highlighted about the new forex trading platform...international trading platform...isn't that something useful for foreign looking for a quick exit strategy. I'm not into the currency scene so you'd probably know more. As for other things like political risk? Nigeria is just as risky as us.

@vvs. I don't have a link. It's based on a convo I had with a foreigner. He mentioned countries like Nigeria, Zambia and Malawi (I think) with these kinds of bonds. You're right about the returns...the weaker shilling is bad for them. But currency is pretty stable now. I don't know why.

scubi

maybe the bonds he mentioned are structured products..bond is really sovereign but return is based on fcy yields..US UK EU..by structual flaws i mean illiquidity- u cant short GoK bonds,market is illiquid,its hard to get a 2 way price, its hard to get an objective valuation of ur holdings(yield curve)...

Kizee

What makes Nigeria more liquid than us? Oil revenues I bet? Which sector in Kenya has the potential to flush our economy with liquidity?

As for the fx platform, maybe we cud go to that original post you did and you cud tell me what the platform cud do for foreign investment. I haven't a clue but it sounded like it wud improve liquidity.

scubz

nigeria FI is more liquid becoz
1. u can short sell theyr bonds
2. the market is transparent
3. kenyan FI market processes until recently were draconic and hence curbed turnover
as a result a wide variety of offshores hav chekd into theyr market..its nothing to do with oil...fyi the KES is africas second most liquid currency...bnot bad eh?

kizee. I didn't know KES was Africa's second most liquid currency, that's amazing. I figured cos of Nigeria's huge banks & oil, they'd be up there. And ur probably right on the Nigerian bond issue as well, it was probably a structured product.

But as developed as their market is they ran into real problems with margin loans. What you think of those at the NSE? btw I heard that there were some bond traders at the NSE who tried short selling bonds (not many) but CMA wudn't have any of it.

@scubidu re short sellin..yes ur right cma blocked it but GoK bonds need not be traded at an exchange and soon short sellin will be a reality re margin tradin...one of the golden rules is NEVER BET THE FARM...i dont beleive in leverage its very hard to stay in the game long

@gathinga
re kes i really hav no link...i just kno.. ask any EM market trader and he will tell u the same..main reason is many african ctrys have exchange controls which kenya doesnt...kenyas financial market scene is set to explode i tell u