Weekly Commentary – 17th September 2021

Foreign Exchange Reserves

The CBK’s usable foreign exchange reserves remained adequate at USD 9,619 million (5.88 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 the Sterling Pound but strengthened against the Euro. The decline in the dollar is attributable to increased dollar demand from importers.

	Week Before	Week After
Dollar	109.87	110.09
Euro	130.02	129.67
Sterling Pound	151.82	152.27

Liquidity

Money markets remained relatively liquid supported by Treasury’s efforts to raise new debt.

Remittance inflows increased in relation to the 4.25 percent cash reserves requirement (CRR). Open market operations remained active.

	Week Before	Week After
Interbank rate	3.63%	4.24%
Interbank volume (billion)	13.66	17.24
Commercial banks’ excess reserves (billion)	10.2	3.90

Fixed Income

T-Bills

The T-Bills subscription rate remained under-subscribed. The under-subscription in T-Bills is attributable to tightened liquidity in the market.

T-Bill	Yield (% Rate)		Subscription Rate
	Week Before	Week After	Week Before	Week After
Overall			72.65%	54.57%
91 day	6.78%	6.87%	172.53%	83.79%
182 day	7.25%	7.25%	77.03%	67.96%
364 day	7.78%	7.85%	28.31%	29.50%

T-Bonds

The bonds market had high demand for the week’s bond offers. Bonds turnover increased to Kshs 39.56 billion from Kshs 11.53 billion recorded in the previous week.

In the international market, Eurobonds recorded mixed performance. Yields on Kenya’s 7-year Eurobond increased by an average 0.1% points to 4.8%. The yields on the 10-year, 2018 issue, 30-year 2018 issue, 12-year 2019 issue and 12-year 2021 issue remained unchanged at 5.0%, 7.2%, 6.2% and 6.1%.

Equities

NASI and NSE 25 increased by 1.45% and 1.67% while the NSE 20 declined 0.10%. Market capitalization increased by 1.45% to 2.85 trillion. The performance was driven by gains recorded by large-cap stocks. Top gains were recorded in Equity Group Plc, KCB Group and Safaricom Plc which gained by 4.4%, 4.2%, and 1.7% respectively.

The Banking sector had shares worth Kshs 762m transacted which accounted for 30.34% of the week’s traded value, Manufacturing & Allied sector represented 5.29% and Safaricom with shares worth Kshs 1.4Bn transacted, contributed 57.97%.

Top Losers	W-o-W
Uchumi	-15.38%
Standard Group	-10.83%
Scangroup	-6.47%
NBV	-5.28%
NSE	-4.73%

Alternative Investments

	Week Before	Week After	% Change
Derivatives Turnover (million)	4.4	9.8	-82.71%
Derivatives Contracts	56	100	124%
I-REIT Turnover (million)	14.3	9.8	-31.19%
I-REIT Total Deals	48	61	27.08%

Global and Regional Markets

Global Markets	W-o-W
S&P 500	-0.57%
Dow Jones Industrial Average (DJI)	-0.07%
FTSE 100 (FTSE)	-0.93%
STOXX Europe 600	-0.96%
Shanghai Composite (SSEC)	-2.41%
MSCI Emerging Markets	2.26%
MSCI World Index	-0.82%

Continental Markets	W-o-W
FTSE ASEA Pan African Index	0.48%
JSE All Share	-2.70%
NSE All Share (NGSE)	0.06%
DSEI (Tanzania)	0.76%
ALSIUG (Uganda)	1.37%

Global stocks markets declined over the week. This was driven by falling world share prices due to mixed economic data and fears over the stability of growth. In addition, Asian markets put the focus on the U.S. Federal Reserve’s timeline for tapering asset purchases.

U.S. stocks ended the week sharply lower due to worries of a corporate tax, the Delta Covid variant, and possible shifts in the U.S. Federal Reserve’s timeline for gradually decreasing asset purchases.

Asia Pacific stocks were mixed at the end of the week, with investors weighing the impact of China’s latest regulatory tightening alongside the prospect of reduced U.S. Federal Reserve stimulus.

On the regional front, the JSE All Share Index declined due to South Africa’s rand weakening as the U.S. dollar rose and weak domestic economic data weighed on investor sentiment.

On the global commodities markets, Crude Oil WTI closed the week increased by 3.23% and the ICE Brent Crude increased by 3.32%. Gold futures prices decreased by 2.27% to settle at $1,751.40.

Week’s Highlights

• China is the leading bilateral lender to Kenya, accounting for 67% of its external debt. This is according to a status report on Kenya’s Public Debt presented to the Senate Committee on Finance and Budget by the Central Bank of Kenya(CBK) Governor. Kenya’s total debt service to revenues increased to 57% in 2019 from 17% in 2012 due to an increased debt stock and changing terms on new loans including one-off repayment of syndicated loans and Eurobonds in 2019.

• The Controller of Budget (COB) has flagged Treasury for Sh1.7 billion paid to secure future borrowing, saying the loans should be canceled to ease the debt load on taxpayers. Treasury paid the commitment fees for loans to Japanese, Chinese and European banks at the end of June piling pressure on the country’s ballooning debt.

• United Kingdom (Britain) removed Kenya from its Covid-19 travel ban list in a fresh boost for tourism. The ban had been placed in April following the spread of the highly contagious Covid-19 Delta variant , dealing a blow to the tourism sector.

• The Central Bank of Kenya showed that the ratio of currency outside banks to total money supply decreased to 6% up-to-date compared to 7% in 2019 and 8% in 2018. The population has increasingly been engaging in cashless transactions.

• Fuel prices have risen to the highest level in Kenya’s history after the Energy and Petroleum Regulatory Authority (Epra) discontinued a subsidy scheme introduced in April. Expensive fuel could unleash pricing pressure across the economy and have ramifications on the cost of living measure.

• Tier one banks grew their lending to the government by KSh132.8 billion in the 12 months to June 2021, continuing a preference for the risk-free securities that are paying as much interest as customer loans. Their holdings of government securities grew at a faster pace compared to customer loans and private sector loans.