Weekly Commentary – 11th February 2022

Foreign Exchange Reserves

The CBK’s usable foreign exchange reserves remained adequate at USD 8,196 million (5.01 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 depreciated against the Dollar, the Euro and the Sterling Pound. The depreciation against the dollar is attributable to increased dollar demand from oil and energy importers.

	Week Before	Week After
Dollar	113.60	113.63
Euro	128.08	129.61
Sterling Pound	153.65	153.85

Liquidity

Liquidity in the money markets tightened, supported by tax remittances which partly offset government payments. Open market operations remained active.

	Week Before	Week After
Interbank rate	4.36%	4.45%
Interbank volume (billion)	13.49	10.87
Commercial banks’ excess reserves (billion)	11.30	11.10

Fixed Income

T-Bills

The T-Bills became under-subscribed during the week. The decline in subscription is attributable to tightened liquidity in the money markets. Investors however preferred the 364 day paper which offered higher yields.

T-Bill	Yield (% Rate)		Subscription Rate
	Week Before	Week After	Week Before	Week After
Overall			111.52%	83.52%
91 day	7.32%	7.29%	84.63%	72.25%
182 day	8.10%	8.11%	82.44%	63.98%
364 day	9.59%	9.67%	161.68%	83.52%

T-Bonds

The bonds market had high demand for the months bond offers. Bonds turnover increased to Kshs 12.53 billion from Kshs 9.60 billion recorded in the previous week.

In the international market, yields on the 2014 10-year bond remained unchanged at 4.1%, while yields on the 2018 10-year bond and the 2019 7-year bond increased by 0.2% points to 6.8% and 6.6%, respectively. Yields on the 2018 30-year bond increased marginally by 0.1% points to 8.7%, while the yields on the 12-year bond issued in 2019 and 12-year bond issued in 2021 both increased by 0.3% points to 7.5% and 7.4%, respectively.

Equities

NASI and NSE 25 increased by 0.55% and 0.02% while NSE 25 declined by 0.20%. Market capitalization also increased by 0.55% to 2.62 trillion. The performance was driven by gains recorded by large-cap stocks. Top gains were recorded in Safaricom Plc, Standard Chartered Bank Kenya and Equity Group Plc which increased by 1.30%, 1.10% and 0.5% respectively.

The Banking sector had shares worth Kshs 824M transacted which accounted for 31.44% of the week’s traded value, Manufacturing & Allied sector had shares worth 250M transacted which represented 9.57% and Safaricom with shares worth Kshs 1.5B transacted, contributed 57.56%.

Top Losers	W-o-W
TP Serena	-12.05%
Olympia Capital Holdings	-9.05%
Flame Tree Group	-5.80%
Carbacid	-5.48%
Eveready	-4.00%

Alternative Investments

	Week Before	Week After	% Change
Derivatives Turnover (million)	2.48	4.47	79.92%
Derivatives Contracts	24	15	-37.50%
I-REIT Turnover	0.23	0.24	3.44%
I-REIT Deals	59	56	-5.08%

Global and Regional Markets

Global Markets	W-o-W
S&P 500	-1.82%
Dow Jones Industrial Average (DJI)	-1.00%
FTSE 100 (FTSE)	1.92%
STOXX Europe 600	1.61%
Shanghai Composite (SSEC)	3.02%
MSCI Emerging Markets	1.59%
MSCI World Index	-0.73%

Continental Markets	W-o-W
FTSE ASEA Pan African Index	1.51%
JSE All Share	1.46%
NSE All Share (NGSE)	-0.16%
DSEI (Tanzania)	-0.09%
ALSIUG (Uganda)	-0.87%

U.S stocks closed the week low, as a decline in Technology, Consumer Services and Consumer Goods sectors led the stocks lower. Investors’ jitters also intensified following the deepening tension between Russia and Ukraine, as well as the fears of inflation and rising interest rates.

European stocks closed the week higher, boosted by gains in Technology stocks and strong earnings from German industrial giant Siemens. However, investors are still wary of the released monthly U.S inflation report.

Asia Pacific stocks also closed the week high as investors keep an eye on continuous robust corporate earnings against worries about a rapid withdrawal of stimulus measures since the Covid-19 pandemic. Investors expect the U.S. Federal Reserve to adopt a more aggressive liftoff in March as the released data showed a mounting U.S. inflation.

On the global commodities markets, Crude Oil WTI closed the week high with 0.86% and the ICE Brent Crude increased by 1.25%. Gold futures prices also increased by 1.90% to settle at $1,842.10.

Week’s Highlights

• Stanbic Bank released its monthly Purchasing Manager’s Index for the month of January, which decreased to a 14-month low of 47.6, from 53.7 recorded in December 2021. The drastic drop is attributed to lower domestic spending and travel emanating from increased price pressures and a surge in Omicron variant cases of Covid-19 at the start of the year.

• The Treasury has diverted Sh 2.07 billion from the Petroleum Development Fund (PDF) to other State agencies going against the law, draining cash meant for cushioning consumers against high fuel prices. The state agencies include: Rural Electrification and Renewal Energy Corporation, the Ministry of Energy, the Nuclear Power and Energy Agency and the Kenya Energy Sector-Environment and Social Responsibility Programme. The diversion piled more pressure on the fuel subsidy scheme as the government has since last year grappled with a lack of funds to fully compensate oil marketers for keeping pump prices unchanged.

• Equity Group Holdings and Kenya Commercial Bank have been named among 500 top global lenders by brand value, supported by positive sentiments from their customers who rated them on factors like quality, reputation, and customer satisfaction. The two were ranked in positions 338 and 366 respectively by global brand valuation consultancy Brand Finance which assigned their brands a value of $388 million (Sh44.1 billion) and $338 million (Sh38.4 billion) respectively.

• Selling activity by foreign investors at the bourse decelerated at the start of the year, compared to December 2021 which was characterised by profit-taking on blue chip stocks. Data from the NSE shows investors made Sh 423 million in January, compared to Sh 2.87 billion in December 2021, as investors look forward to better dividend payments tied to the 2021 financial year, especially among banks.

• The country’s foreign debt repayments reduced by Sh72.33 billion to Sh 328.13 billion after parastatals resumed servicing loans earlier than expected in the wake of the pandemic. The Public Debt Management Office (PDMO) at the Treasury says it has cut projected spending on foreign debt by 18.06%.

• Mobile money transactions in Kenya surged 32% to Sh 6.8 trillion in 2021 compared to Sh 5.2 trillion, attributable to an increase in the use of cashless transactions by firms and households. This comes at a time when the country is steadily recovering from the pandemic-induced disruptions.