Weekly Commentary – 10th September 2021

Foreign Exchange Reserves

The CBK’s usable foreign exchange reserves remained adequate at USD 9,629 million (5.89) months of import cover). This meets CBK’s statutory requirement to endeavor to maintain at least 4.0-months of import cover, and the EAC region’s convergence criteria of 4.5-months of import cover.

Currency

The Kenyan Shilling appreciated against the Dollar and the Euro, but depreciated against the Sterling Pound. This is attributable to increased dollar demand from general importers.

	Week Before	Week After
Dollar	109.99	109.87
Euro	130.26	130.02
Sterling Pound	151.61	151.82

Liquidity

Money markets remained relatively liquid, supported by government payments which partly offset tax remittances. Open market operations remained active.

	Week Before	Week After
Interbank rate	3.34%	3.63%
Interbank volume (billion)	11.76	13.66
Commercial banks’ excess reserves (billion)	13.0	10.2

Fixed Income

T-Bills

The Treasury Bills remained under-subscribed. The under subscription in T-Bills is attributable to tightened liquidity in the market as well as a concurrent infrastructure bond sale in the primary bond market.

T-Bill	Yield (% Rate)		Subscription Rate
	Week Before	Week After	Week Before	Week After
Overall			99.48%	72.65%
91 day	6.77%	6.78%	100.79%	172.53%
182 day	7.23%	7.25%	98.95%	28.31%
364 day	7.52%	7.78%	99.48%	72.65%

T-Bonds

The bonds market had high demand for the week’s bond offers. Bonds turnover increased to Kshs 11.53 billion from Kshs 10.88 billion recorded in the previous week.

In the primary bond market, the Treasury issued a 21-year infrastructure bond, IFB1/2021/021, which was oversubscribed at 201.67%. Bids worth Kshs 151.26 billion were received against the target of Kshs 75 billion, with a coupon rate of 12.737%. The government rejected high bids and accepted Kshs 106.75 million out of Kshs 151.26 million, translating to an acceptance rate of 70.58%.

In the international market, yields on Kenya’s 10 year Eurobond increased by an average of 12.9 basis points. The yields for Angola’s 10-year Eurobond and that of Ghana also increased marginally.

Equities

NASI, NSE 20 and NSE 25 increased by 0.37%, 1.88% and 0.42% respectively. Market capitalization also increased by 0.37% to 2.81 trillion. The performance was driven by gains recorded by large-cap stocks. Top gains were recorded in Equity Group Plc, NCBA Group and Safaricom Plc which gained by 2.2%, 1.7%, and 0.8% respectively.

The Banking sector had shares worth Kshs 683M transacted which accounted for 33.90% of the week’s traded value, Manufacturing & Allied sector represented 3.90% and Safaricom with shares worth Kshs 1.0B transacted, represented 50.85%.

Top Losers	W-o-W
BK Group	-17.22%
Eveready	-9.80%
Olympia Capital	-8.64%
Liberty Holdings	-7.95%
Sanlam Kenya	-5.52%

Alternative Investments

	Week Before	Week After	% Change
Derivatives Turnover (million)	25.60	4.43	-82.71%
Derivatives Contracts	25	56	124%
I-REIT Turnover (million)	0.18	14.31	7927.9%
I-REIT Total Deals	41	48	17.07%
Exchange Traded Funds	0	0

Global and Regional Markets

Global Markets	W-o-W
S&P 500	-1.69%
Dow Jones Industrial Average (DJI)	-2.15%
FTSE 100 (FTSE)	-1.53%
STOXX Europe 600	-1.18%
Shanghai Composite (SSEC)	2.22%
MSCI Emerging Markets	-0.53%
MSCI World Index	-1.32%

Continental Markets	W-o-W
FTSE ASEA Pan African Index	0.28%
JSE All Share	-3.21%
NSE All Share (NGSE)	-0.86%
DSEI (Tanzania)	-0.11%
ALSIUG (Uganda)	-1.32%

European stocks traded lower and Wall Street reversed earlier gains as investors weighed uncertainty over central bank tapering and economic recovery due to the coronavirus Delta variant alongside strong U.S. weekly jobless claims data. Federal Reserve Bank Governor also announced that the weak August jobs report likely will not throw off the central bank’s plan to trim its $120 billion in monthly bond purchases later this year.

US stocks closed the week lower as well, after data showing persistent U.S. inflation offset expectations of easing U.S.-China tensions after a call between President Joe Biden and China’s Xi Jinping. US producer prices increased solidly in August, indicating that high inflation is likely to persist for a while, with supply chains remaining tight as the Covid-19 pandemic drags on.

Asia Pacific stocks closed the week high, as investors digested the latest European Central Bank (ECB) policy decision. Ongoing efforts to support the economic recovery from Covid-19 were also in focus.

On the global commodities markets, Crude Oil WTI closed the week high by 1.94% while the ICE Brent Crude increased by 1.76%. Gold futures prices declined by 2.03% to settle at $1,792.10.

Week’s Highlights

• Stanbic Bank released the monthly PMI index for the month of August, which increased to 51.1 from 50.6 in the month of July, indicating that business conditions improved. Output levels continued to improve, but at a slower rate compared to July. This shows that some businesses were unable to keep up with increased demand.

• Kenya’s economy has expanded by Kshs 515 billion after rebasing to capture new sectors whose output had grown in recent years. The most significant upward revisions in magnitudes of nominal gross value added were in transportation and storage, real estate, and public administration. Information and communication technology and professional scientific and technical activities were estimated at approximately double the previous levels. Higher GDP figures improve Kenya’s debt-to-GDP ratios and can, therefore, be applied by the country to justify the capacity to carry a larger debt load.

• Foreign inflows at the NSE stood at Kshs 1.72 billion in the month of August, compared to Kshs 621 million in January, indicating increased confidence in blue chips such as Safaricom and tier one banking stocks. Improved appetite for local stocks is attributed to payments of interim dividends and increased net profits in the first half of the year. Net sales however declined to 3.28 billion in the first eight months to August compared to 26.8 billion last year

• Tax revenues from the transfer of property increased by 14.25% to Kshs 15.51 billion in the recently concluded financial year, compared to Kshs 13.57 billion in a similar period last year. This was boosted by new regulations that allowed private practitioners to conduct valuation on behalf of the government, which were part of the reforms aimed at improving Kenya’s global ranking in registering property

• Cash handled by mobile money agents grew by 48% to Kshs 3.8 trillion in the seven months to July, compared to Kshs 3.8 trillion in a similar period last year – an average of half a billion shillings per month. This is attributable to the ongoing economic recovery from the pandemic as a result of reopening and rebounding of various sectors of the economy.

• The Kenya Revenue Authority collected Kshs 330.71 billion as corporation tax in the recently concluded financial year, surpassing the Treasury’s target by 7.37%. This was boosted by economic recovery and inflows from halted Covid-19-related tax reliefs.