Weekly Commentary – 17th June 2022

Foreign Exchange Reserves

The CBK’s usable foreign exchange reserves remained adequate at USD 8,114 million (4.82 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 and slightly gained against the Euro and the Sterling Pound to exchange at Ksh 117.33, Ksh 122.42 and 142.18 respectively. The observed overall depreciation against the Dollar is attributable to increased Dollar demand from energy and commodity importers.

	YTD Change	W-o-W Change
Dollar	3.70%	0.24%
Euro	-4.43%	-2.33%
Sterling Pound	-6.67%	-3.25%

Liquidity

Liquidity in the money markets tightened, partly reflecting government payments which offset tax remittances. Open market operations remained active. Diaspora remittances for the month of May stood at $339.7M representing a 7.57% and a -4.31% change year on year and month on month respectively.

	Week (previous)	Week (ending)
Interbank rate	4.83%	5.12%
Interbank volume (billion)	27.91	10.55
Commercial banks’ excess reserves (billion)	14.80	45.20

Fixed Income

T-Bills

T-Bills remained under-subscribed during the week with an increase in the overall subscription rate from 61.26% recorded in the previous week to 80.80%. The 364-day T-Bill got the highest subscription rate at 90.0% while the 91-day T-Bill and 182-day T-Bill had a subscription rate of 76.8% and 73.2% respectively. The under-subscription is attributed to reduced investor sentiments in the face of high currency and inflation risks. The acceptance rate decreased by 1.40% to close the week at 94.00%.

T-Bonds

The bonds market had a higher demand for the week’s bond offers. Bonds turnover increased by 40.58% from 12.65B in the previous week to 17.78B. Total bond deals increased by 143.71%.

In the primary market, the Central Bank opened the tap sale for two fixed coupon treasury bonds; FXD1/2022/03 and FXD1/2022/15 dated 27/06/2022 seeking to raise Ksh. 25 Billion for budgetary support. The 3-year and 15 year bond will attract average yields of 11.766% and 13.942% respectively while the coupon rate was fixed at 11.766% and 13.942% respectively.

Eurobonds

In the international market, the yields on the 10-year Eurobonds for Angola and Ghana declined. Yields on Kenya’s Eurobonds generally increased by 1.14% compared to the previous week, 3.01% and 7.28% month to date and year to date respectively. Below is a summary analysis of performance for individual bonds.

Bond	YTD Change	M-o-M Change	W-o-W Change
2014 10-Year Issue	10.74%	4.32%	1.68%
2018 10-Year Issue	7.53%	3.06%	1.16%
2018 30-Year Issue	4.68%	1.88%	0.75%
2019 7-Year Issue	9.34%	4.33%	1.69%
2019 12-Year Issue	6.15%	2.42%	0.85%
2021 12-Year Issue	5.26%	2.03%	0.71%

Equities

NASI, NSE 20 and NSE 25 decreased by 6.22%, 2.97% and 5.49% compared to last week bringing the year to date performance to -27.10%, -15.02% and -23.42% respectively. The market capitalization decreased by 6.24% compared to the previous week down to 1.897 trillion bringing the year to date performance to a negative position of 27.09%. The performance was driven by loses recorded by large-cap stocks. Top loses were recorded in Safaricom, Equity, EABL and ABSA which decreased by 8.99%, 7.65%, 6.39% and 6.09% respectively.

The Banking sector had shares worth Kshs 278M transacted which accounted for 13.09% of the week’s traded value, Manufacturing & Allied sector had shares worth 117.8M transacted which represented 8.37% and Safaricom, with shares worth Kshs 1.68B transacted represented 76.57% of the week’s traded value.

Top Losers	YTD Change	W-o-W
Express Kenya	-26.83%	-12.28%
Longhorn	-22.17%	-11.21%
Safaricom	-36.30%	-8.99%
Car & General	23.71%	-8.70%
Fahari I-REIT	-13.71%	-7.97%

Alternative Investments

	Week (previous)	Week (ending)	% Change
Derivatives Turnover (million)	4.12	5.75	39.59%
Derivatives Contracts	58	72	24.14%
I-REIT Turnover	0.13	0.75	501.03%
I-REIT Deals	38	38	00.00%

Global and Regional Markets

Global Markets	YTD Change	W-o-W
S&P 500	-23.39%	-5.79%
Dow Jones Industrial Average (DJI)	-18.30%	-4.79%
FTSE 100 (FTSE)	-6.51%	-4.12%
STOXX Europe 600	-17.70%	-4.61%
Shanghai Composite (SSEC)	-8.69%	0.97%
MSCI Emerging Markets	-18.55%	-4.74%
MSCI World Index	-23.31%	-5.90%

Continental Markets	YTD Change	W-o-W
FTSE ASEA Pan African Index	-14.02%	-3.49%
JSE All Share	-11.85%	-3.69%
NSE All Share (NGSE)	20.34%	-2.68%
DSEI (Tanzania)	-3.04%	-1.58%
ALSIUG (Uganda)	-15.20%	-3.33%

U.S stocks closed the week low, as gains in the Telecoms, Technology and Consumer Services sectors led shares higher while losses in the Oil & Gas, Utilities and Basic Materials sectors led shares lower. However, the stocks have been on a negative position for the better part of the week as investors weighed up the growing risk of a recession after the Federal Reserve delivered its biggest rate hike of 75 basis points since 1994 earlier this week.

European stocks closed the week lower amid a bruising week dominated by monetary policy tightening by a number of major central banks. The U.S. Federal Reserve hiked by 75 basis points on Wednesday. On Thursday, the Swiss National Bank unexpectedly lifted rates by 50 basis points and the Bank of England also also hiked its rate for the fifth consecutive time by 25 basis points.

Asia Pacific stocks closed the week higher, as investor sentiments relatively improved in light of hikes of key rates by central banks. China, Japan, South Korea, Australia and Hong Kong’ reported a decrease. However, the Bank of Japan held on to its strategy of pinning 10-year yields near zero at its policy meeting on Friday.

On the global commodities markets, Crude Oil WTI closed the week lower by 8.44% and the ICE Brent Crude decreased by 6.88%. Gold futures prices decreased by 1.79% to settle at $1,841.90.

Week’s Highlights