Weekly Commentary – 14th May 2021

Foreign Exchange Reserves

The CBK’s usable foreign exchange reserves remained adequate at USD 7,594 million (4.64 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 of the shilling is attributable to increased dollar demand from energy and general merchant importers.

	Week Before	Week After
Dollar	106.86	107.02
Euro	127.94	129.75
Sterling Pound	147.67	151.21

Liquidity

Liquidity in the money markets was relatively liquid, supported by Government payments which partly offset tax remittances. Open market operations remained active.

	Week Before	Week After
Interbank rate	4.39%	4.04%
Interbank volume (billion)	7.41	12.38
Commercial banks’ excess reserves (billion)	12.30	9.60

Fixed Income

T-Bills

The Treasury Bills remained over-subscribed. The over-subscription in T-Bills is attributable to improved liquidity in the money markets as evidenced by a decrease in interbank rates.

T-Bill	Yield (% Rate)		Subscription Rate
	Week Before	Week After	Week Before	Week After
Overall			131.01%	110.74%
91 day	7.15%	7.16%	46.45%	35.71%
182 day	7.99%	8.00%	42.64%	28.86%
364 day	9.42%	9.37%	253.19%	222.62%

T-Bonds

The bonds market had a high demand for the week’s bond offers. Bonds turnover increased to Kshs 20.49 billion from Kshs 19.50 billion the previous week.

The Central Bank reopened FXD2/2019/15 and issued a new bond FXD1/2021/25 with coupon rates of 12.98% and 13.92% respectively, and effective tenors of 13.0 years and 25.0 years respectively. The bids received amounted to Kshs 20.93 billion against an advertised amount of Kshs 20 billion, translating to a performance rate of 104.67%. The CBK rejected high bids and accepted only Kshs 20.69 billion – an acceptance rate of 98.85%.

In the international market, yields on Kenya’s Eurobonds increased by an average of 3.9 basis points. The yields for Angola’s 10-year Eurobond and that of Ghana also increased marginally.

Equities

NASI and NSE 25 declined by 3.12% and 3.73% respectively, while NSE 20 increased by 0.04%. Market capitalization decreased by 1.83% to 2.58 trillion. The performance was driven by losses recorded by large-cap stocks. Top losses were recorded in Safaricom and Co-operative Bank which declined by 3.4% and 1.2% respectively.

The Banking sector had shares worth Kshs 1.8B transacted which accounted for 60.96% of the week’s traded value, Manufacturing & Allied sectors represented 4.35% and Safaricom with shares worth Kshs 980M transacted, represented 32.14%.

Top Losers	W-o-W
WPP ScanGroup	-8.85%
Uchumi	-8.00%
Express Kenya	-7.32%
BOC Kenya	-6.52%
Olympia Capital	-5.58%

Alternative Investments

	Week Before	Week After	% Change
Derivatives Turnover (million)	8.29	5.40	-34.86%
Derivatives Contracts	180	150	-16.67%
I-REIT Turnover (million)	0.22	0.24	9.72%
I-REIT Total Deals	32	32	12.50%

Global and Regional Markets

Global Markets	W-o-W
S&P 500	-1.39%
Dow Jones Industrial Average (DJI)	-1.14%
FTSE 100 (FTSE)	-1.21%
STOXX Europe 600	-0.54%
Shanghai Composite (SSEC)	2.09%
MSCI Emerging Markets Index	-3.04%
MSCI World Index	-1.37%

Continental Markets	W-o-W
FTSE ASEA Pan African Index	0.29%
JSE All Share	-3.20%
NSE All Share (NGSE)	0.75%
DSEI (Tanzania)	-1.16%
ALSIUG (Uganda)	0.20%

European stocks rose towards the end of the week as the rebound continued from a selloff caused by inflation fears, with mining stocks being the major drag on European indexes. The Federal Reserve officials however managed to ease investor jitters over growing inflationary pressures.

Major indices in the US stock market rallied towards the close of the week despite opening the week low, as investors set aside worries on inflation and bought shares, with the shift back into riskier assets. The weekly loss for the broader market followed a wobble earlier in the week, when fears of runway inflation prompted investors to hit pause on the stocks.

Asia Pacific stocks also rose towards the end of the week with investors shifting their focus to value from growth companies as signs of a strengthening US labour market calmed inflation worries.

On the global commodities markets, Crude Oil WTI closed the week high by 0.72% and the ICE Brent Crude also increased by 0.63%. Gold futures prices increased by 0.65% to settle at $1,843.85.

Week’s Highlights

• The Energy and Petroleum Regulatory Authority has reviewed upwards the prices of fuel for the period 15th May to 14th June 2021. Super petrol increased by 2.9% to retail at Kshs 126.4 per litre, while the prices of diesel and kerosene remained unchanged. This is despite a 2% increase in the landing costs of kerosene and a decline of 0.6% and 1.0% in the prices of super petrol and diesel respectively.

• Mass retirement of civil servants has pushed pension payouts to more than Sh150 billion, highlighting the burden of a fast-aging public service to taxpayers. According to the Treasury, the pension department will need Sh153.64 billion in the next fiscal year to fund monthly pension claims and gratuity payments to senior citizens. This is a 38.24% jump over budget for the current year ending June.

• The Institute of Pension Management and the School of Pension and Retirement Studies have partnered to offer financial literacy to both individuals and corporates across East Africa on pension matters. The training is aimed at expanding financial literacy, improving investor knowledge and help promote a saving and investing culture so that people can meet their financial and retirement goals.

• Land prices in Nairobi and the surrounding counties of Kiambu, Kajiado and Machakos have increased in the first quarter of the year on the back of ongoing recovery from coronavirus hardships that failed to lift home prices. According to HassConsult’s quarterly pricing index survey, land prices increased by 0.2% in quarter one, the fastest growth since the country reported the first Covid-19 case. However, home prices remain subdued.

• Amazon has issued bonds worth $18.5 billion and the proceeds are aimed at refinancing debt and buying back the company’s stock. The $18.5 billion bond sale would be Amazon’s biggest sale in history. The company had initially targeted – between $15 billion and $16 billion.