Foreign Exchange Reserves

The CBK’s usable foreign exchange reserves remained adequate at USD 7,294 million (4.11 months of import cover). This meets CBK’s statutory requirement to endeavor to maintain at least 4.0-months of import cover. However, it does not meet EAC region’s convergence criteria of 4.5-months of import cover.

Currency

The Kenyan Shilling depreciated against the Dollar but strengthened against the Euro and the Sterling Pound to exchange at KES 120.97, KES 117.35 and KES 134.81 respectively. The observed depreciation against the Dollar is attributable to increased Dollar demand from energy and commodity importers.

 YTD ChangeW-o-W Change
Dollar6.93%0.10%
Euro-8.38%-1.80%
Sterling Pound-11.51%-1.39%

Liquidity

Liquidity in the money markets eased, partly reflecting government payments which offset tax remittances. Remittance inflows totaled USD 318.0 million in September 2022, a 2.42% increase from USD 310.5 in August and a 2.65% increase from USD 309.8 million in September 2021. Open market operations remained active.

 Week (previous)Week (ending)
Interbank rate5.1%4.7%
Interbank volume (billion)24.413.1
Commercial banks’ excess reserves (billion)26.223.6

Fixed Income

T-Bills

T-Bills were over-subscribed during the week with an increase in the overall subscription rate from 38.80% recorded in the previous week to 109.99%. The 91-day T-Bill received the highest subscription rate at 452.17% while the 182-day T-Bill and 364-day T-Bill had a subscription rate of 68.83% and 14.28% respectively. The acceptance rate increased by 186.58% to close the week at 79.41%.

T-Bonds

In the secondary bond market, there was a higher demand for the week’s bond offers. Bonds turnover increased by 5.48% from 13.6B in the previous week to 14.3B. Total bond deals increased by 9.44% from 392 in the previous week to 429.

Eurobonds

In the international market, yields on Kenya’s Eurobonds increased by an average 0.33% compared to the previous week, decreased 0.63% month to date and increased 8.13% year to date. The yields on the 10-year Eurobonds for Angola and Ghana also increased. Below is a summary analysis of performance for individual bonds.

BondYTD ChangeM-o-M ChangeW-o-W Change
2014 10-Year Issue11.74%-1.26%0.18%
2018 10-Year Issue8.23%-0.75%0.34%
2018 30-Year Issue5.22%-0.65%0.23%
2019 7-Year Issue9.59%-0.48%0.36%
2019 12-Year Issue7.36%-0.71%0.23%
2021 12-Year Issue6.64%0.07%0.66%
Equities

NASI, NSE 20 and NSE 25 increased by 2.83%, 1.40% and 3.01% respectively compared to last week bringing the year to date performance to -22.26%, -11.18% and -16.78% respectively. The market capitalization also increased by 2.84% from the previous week to close at 2.02 trillion recording a year to date decline of 22.24%. The performance was driven by gains recorded by large-cap stocks such as EABL, Safaricom, Standard Chartered, ABSA and Co-operative Bank of 24.09%, 3.23%, 2.60%, 1.83% and 1.27% respectively.

The Banking sector had shares worth KES 237M transacted which accounted for 19.93% of the week’s traded value, Manufacturing & Allied sector had shares worth KES 84M transacted which represented 7.08% and Safaricom, with shares worth KES 697M transacted represented 58.69% of the week’s traded value.

Top Gainers and Losers in the Equities Markets

Top GainersYTD ChangeW-o-W
EABL2.72%24.09%
NBV-39.61%5.86%
Liberty Kenya-22.38%5.79%
Longhorn-0.50%4.77%
Crown Paint36.07%4.53%
Top LosersYTD ChangeW-o-W
Flame Tree-8.00%-9.45%
Eaagads Ltd-12.59%-9.23%
Sasini12.30%-8.89%
Olympia20.00%-8.43%
TP Serena-14.75%-7.14%

Alternative Investments

 Week (previous)Week (ending)% Change
Derivatives Turnover (million)1.611.22-24.66%
Derivatives Contracts3128-9.68%
I-REIT Turnover0.160.12-22.20%
I-REIT Deals3220-37.50%

Global and Regional Markets

Global MarketsYTD ChangeW-o-W
S&P 500-25.30%-1.55%
Dow Jones Industrial Average (DJI)-18.97%1.18%
FTSE 100 (FTSE)-8.61%-1.89%
STOXX Europe 600-20.14%-0.09%
Shanghai Composite (SSEC)-15.43%1.57%
MSCI Emerging Markets-30.01%-3.83%
MSCI World Index-26.68%-1.70%
Continental MarketsYTD ChangeW-o-W
FTSE ASEA Pan African Index-27.28%-0.63%
JSE All Share-13.70%-2.42%
NSE All Share (NGSE)10.56%0.46%
DSEI (Tanzania)-3.36%-0.71%
ALSIUG (Uganda)-14.81%-1.10%

US stocks recorded a mixed performance with the Dow Jones Industrial Average at a 1.18% week on week high while other major indices closed lower. This followed release of the Consumer Price Index, which rose to a higher than expected annual rate of 8.2% in September, affirming the Federal Reserve’s plan to stay course with rate hikes. Equity declines were attributed to oil prices pushing energy stocks down while consumer stocks fell amid buyers’ focus on inflation data. The quarter three earnings reporting season began on a positive note with JP Morgan Chase & Co, Wells Fargo & Co and Citigroup’s shares rising after release of their reports.

European stocks closed on a high with Friday’s gains erasing losses recorded at the beginning of the week. Gains were led by real estate stocks and utilities, while major indices still reflect the market’s uncertainty regarding UK’s fiscal plan. This comes after the British government’s turnaround on tax cuts from a pledge to freeze corporation tax at 19% to 25% starting April next year.

Asia Pacific stocks closed the week higher, led by gains of 3.8% from IT giant Infosys Ltd, 1.7% from Nifty’s private sector bank and 1.82% from finance indices. These were however weighed down by energy and automobile stocks which recorded declines of 1% and 0.67% respectively.

On the global commodities markets, Crude Oil WTI and ICE Brent Crude closed the week lower by 7.59% and 6.42% respectively as recession concerns became worries about demand. Gold futures prices decreased by 3.53% to settle at $1,648.90.

Week’s Highlights

  1. The Energy and Petroleum Regulatory Authority (EPRA) released their monthly statement on the maximum retail prices of petroleum products which will be in force from 15th October to 14th November 2022. These are KES 178.3 per litre for Super Petrol, a 0.6% decline from KES 179.3 per litre, KES 163.0 per litre for Diesel, a 1.2% decline from KES 165.0 per litre and KES 146.9 per litre for Kerosene, a 0.7% decline from KES 147.9 per litre.
  1. The Kenya National Bureau of Statistics (KNBS), in the recently released Q2’2022 Gross Domestic Product (GDP) report, indicated that the country’s economy grew by 5.2%, lower than 11.0% in Q2’2021. This was supported by strong performance recorded in sectors like Transportation & Storage (7.1%), Financial & Insurance (11.6%), Accommodation & Food Services (22.0%), Mining & Quarrying (22.6%) among others. Performance in agriculture, forestry and fishing remained subdued due to unfavorable weather conditions. This was also evident in the significant decline in exports of flowers, vegetables and production of tea, coffee and milk.
  1. Absa Financial Markets Index (AFMI) 2022 ranked Kenya eighth out of 26 countries based on an evaluation of financial market development. This is an improved ranking within the top 10 compared to 2021, with the country lauded for its strides in sustainable finance owing to progress in adopting better environmental, social and governance (ESG) policies and frameworks. Other notable achievements include improved market transparency, tax and regulatory environments in capital markets. The report also recognized the country’s efforts in factoring climate risks into financial stability regulation.
  1. The Retirement Benefits Authority (RBA) is expected to begin reporting on the number of applications by members and uptake of the 40% retirement savings towards purchasing homes from January 2023 following a law review. Uptake of the pension advance has been slow, attributed to withdrawals attracting tax charges, bureaucracy in documentation, property rights issues that impede selling off the units bought using the advance as well as required stamp duty and legal fees not covered.
  1. The government has announced plans to bring 5-10 state owned companies to the market through initial public offerings (IPO) in the next one year, while urging the private sector to follow suit and provide at least 5 listings. This is expected to boost NSE’s performance and bring an end to the six-year listing drought since Stanlib Fahari REIT’s IPO in 2015. The government is also embarking on reviewing the Privatisation Act to create a legal framework that will ease the structure of listing for companies.
  1. Ghana Statistical Service has released September’s inflation rate as 37.2%, a 3.3% jump from 33.9% recorded in August, the highest reading since July 2001. The cedi’s depreciation and expectations of elevated inflation numbers persuaded the Bank of Ghana to adjust the policy rate upwards by 250bps to 24.5%.
  1. The International Monetary Fund (IMF) downgraded its 2023 World Economic Outlook, predicting global growth will slow to 2.7%, 0.2% lower than its July outlook. The cost of living crisis, tightening financial conditions, Russia-Ukraine tensions and the lingering COVID-19 pandemic continue to weigh heavily on the outlook.

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