The stock market offered investors the highest returns in the first half of the year, ahead of fixed income assets and property, as a rally led by bank shares boosted investor wealth at the Nairobi bourse.
Market capitalisation—the measure of investor wealth—at the Nairobi Securities Exchange (NSE) was up 27.8 percent, or Sh817.2 billion, to reach a record high of Sh3.76 trillion as at June 30.
This reaffirmed the Nairobi bourse as the shortest route to wealth in an economy that has oscillated between strong and soft growth.
Treasury bonds issued in the six months offered investors annual interest payments of between 12 percent and 14.2 percent, before withholding taxes of 10 to 15 percent on the interest.
Investors in the shorter Treasury bills earned between 7.4 percent and 9.2 percent in annualised interest as rates remained low despite the rise in inflation in the second quarter of the year on costly fuel following the outbreak of the Iran war.
Investors opting to keep cash in fixed deposit accounts in banks saw the return fall to 6.8 percent in May 2026 from 7.03 percent in December 2025, as the Central Bank of Kenya lowered the base rate to 8.75 percent from 9.0 percent in December.
In the property sector, rental and sales prices were in the single digits of up to 5.1 percent in the period as demand fell due to challenging economic conditions.
This left the equities market unchallenged as the top-performing asset class, buoyed by gains in banking stocks and Safaricom, which together accounted for 71 percent of the NSE’s growth in valuation in the period.
“We saw upward price movement on banks largely due to dynamics of demand and supply, and ultimately it became a case of the rising tide lifting all boats,” said Wesley Manambo, a senior research associate at Standard Investment Bank.
“Looking ahead, we still see pockets of value to be unlocked in the equities market.”
The performance of the various asset classes mirrors the first half of 2025, when the equities market stood out with a 25 percent or Sh477 billion gain, and fixed income assets offered returns of between 8.2 and 15.7 percent.
This year, higher dividends brought demand into the stock market, particularly from local institutional investors, helping it shrug off foreign investor sales caused by global jitters around the Middle East conflict.
The valuation surge was also boosted by two new listings of Kenya Pipeline Company (KPC) in March and Family Bank in May, which added Sh212.16 billion in new wealth to the market.
Excluding the new listings, the NSE would have ended the half year period with a gain of 20.5 percent or Sh605 billion, which would still have been enough to keep it ahead of the other asset classes in the returns race.
The share prices of the NSE’s largest companies by market cap, including Safaricom, Equity Group, KCB Group and Co-operative Bank, rose by between 20 and 43 percent in the half year, backed by dividend-chasing investors.
Safaricom added Sh228.4 billion in valuation to Sh1.36 trillion in the period, after its share price jumped by 20.1 percent to Sh34.05. The telco announced a higher final dividend of Sh1.15 per share in May, taking its full-year dividend for the year ended March 2026 to Sh2.0 per unit, from Sh1.20 in the previous period.
Equity and KCB were up by 20 percent each in the period, adding Sh50 billion and Sh47.8 billion respectively in valuation to close June at Sh301.9 billion and Sh253 billion.
Co-operative Bank gained 43 percent or Sh60 billion to end the period with a valuation of Sh201.2 billion. Other top performers in the banking segment were I&M Group, which added Sh47 billion or 63.7 percent in market cap to Sh120.9 billion, and Absa Bank Kenya at Sh39 billion or 30 percent to Sh1274 billion.
In the fixed income market, the government has been reopening a series of long-dated bonds in the last six months, offering coupons of between 12 percent and 14.2 percent. In the corresponding period last year, bonds at the monthly auctions were paying rates of between 13.5 and 15.7 percent.
Although the war in Iran halted the CBK’s rate cuts as inflation rose to a 28-month high of 6.7 percent I in May, the apex bank was able to resist investor demands for higher bond returns by rejecting expensive bids at the auction.
Treasury bills also remained within the single digits, despite upward pressure on rates in May as investors sought cover against losses due to inflation.
The 91-day paper’s rate ranged between 7.4 percent and 8.82 percent in the period, the 182-day at a range of 7.75 percent and 8.84 percent and the one-year paper at 8.27 percent to 9.2 percent.
Unit trust returns largely reflected the lower rates on T-bills, short-term bonds, and fixed cash deposits, which are their key underlying assets.
By the end of June, shilling-denominated money market funds that carry the bulk of unit trust assets were offering annual returns of between 5.2 and 13.8 percent.
By the end of March, the collective investment schemes had Sh851.7 billion in assets under management, held by 3.63 million investors.
Property sector investors in Nairobi and its satellite towns meanwhile saw lean rental price growth of 1.3 percent in the first quarter of the year, as house sale prices rose by 1.1 percent in the period.
On a 12-month basis, the rental and sale prices grew by 4.5 percent and 1.1 percent respectively, as per the data that was compiled by real estate firm HassConsult.
In the city’s suburbs, land prices went up by 0.85 percent per acre on average in the three months to March, while the satellite town prices rose by 0.54 percent.
HassConsult attributed the sluggish performance to the impact of a challenging economic environment that has constrained demand within the price-sensitive middle-income market.
