(Bloomberg) -- In the space of less than three months, Kenya’s stock benchmark has swung from rock bottom to being the world’s best performer.

The Nairobi Securities Exchange All-Share Index has returned almost 30% for dollar investors this year, the most out of more than 90 benchmarks monitored by Bloomberg. That follows a loss of more than 40% in 2023.

It’s mostly down to the recovery in Kenya’s shilling from an all-time low in January, which is supercharging returns in dollar terms while also spurring solid performances for the nation’s banking stocks.

The currency has strengthened 22% since Jan. 25 following a successful eurobond issue and debt buyback that eased concerns about Kenya’s balance-of-payments position. An injection of $684.7 million from the International Monetary Fund also bolstered the nation’s foreign reserves, while an unexpected rate increase last month is helping to slow inflation.

That’s lured foreign investors back to the country’s stocks, said Wesley Manambo, a senior associate for research at Nairobi-based Standard Investment Bank Ltd. 

“Dividends are now attractive to foreign investors because they’re not losing on capital investments,” Manambo said. “From an FX perspective the risk has declined.”

The shilling gained for a 12th straight session on Monday, on track for its longest winning streak on record. 

“The shilling has regained a lot of ground and is expected to strengthen further,” said Jacques Nel, head of macro research at Oxford Economics. “Clear evidence of multilaterals being in its corner and winning markets over with a debt buyback have breathed new life into the Kenyan currency.”

Even without the currency boost, Kenyan stocks have had a strong year. The the All-Share Index is up 11% in local-currency terms, comfortably beating the 4.3% return of the MSCI Frontier Markets stock index.

That’s been helped by rally in banking stocks following dividend announcements from some of the country’s biggest lenders including Stanbic Holdings Plc, Standard Chartered Bank Kenya Ltd. and Absa Bank Kenya Plc.

Equity Group Holdings Plc, the largest lender by market value, has surged 26% this year, while Co-operative Bank of Kenya Ltd. is up 22% and Absa has added 21%.

 

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