Foreign Exchange Reserves

The CBK’s usable foreign exchange reserves remained adequate at USD 9,521 million (5.82 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, but strengthened against the Sterling Pound and the Euro. The decline in the dollar is attributable to increased dollar demand from importers.

 Week BeforeWeek After
Dollar110.09110.38
Euro129.67129.33
Sterling Pound152.27151.04

Liquidity

Liquidity in the money markets tightened, supported by higher government inflows compared to outflows.

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

 Week BeforeWeek After
Interbank rate4.24%6.05%
Interbank volume (billion)17.24 16.89
Commercial banks’ excess reserves (billion)3.904.00

Fixed Income

T-Bills

The T-Bills subscription rate remained under-subscribed. The under-subscription in T-Bills is attributable to a concurrent bond sale in the primary market.

T-BillYield (% Rate)Subscription Rate
Week BeforeWeek AfterWeek BeforeWeek After
Overall54.57%42.33%
91 day 6.87%6.90%83.79% 119.84%
182 day7.25%7.28%67.96%46.71%
364 day7.85%7.89%29.50%6.95%
T-Bonds

The bonds market had high demand for the week’s bond offers. Bonds turnover increased to Kshs 39.72 billion from Kshs 39.56 billion recorded in the previous week.

In the primary bond market, the government reopened three bonds FXD1/2013/15, FXD3/2019/15 and FXD1/2021/25 with effective tenors of 6.4 years, 12.9 years and 24.7 years respectively.

In the international market, yields on Kenya’s Eurobonds increased by an average of 18.7 basis points. Yields on the 10-year Eurobonds for Angola and Ghana also increased.

Equities

NASI, NSE 20 and NSE 25 decreased by 2.70% and 1.05% 2.41%. Market capitalization also decreased by 2.71% to 2.77 trillion. The performance was driven by gains recorded by large-cap stocks. Top losses were recorded in Equity Group Plc, Standard Chartered Bank, Safaricom Plc and KCB Group which declined by 5.2%, 3.3%, 3.2% and 3.0% respectively.

The Banking sector had shares worth Kshs 1.2B transacted which accounted for 36.92% of the week’s traded value, Manufacturing & Allied sector represented 21.49% and Safaricom with shares worth Kshs 1.2Bn transacted, contributed 38.71%.

Top Gainers and Losers in the Equities Markets

Top GainersW-o-W
Nairobi Business Ventures10.84%
Standard Group Limited8.72%
Jubilee Holdings5.28%
HF Group4.08%
Eveready3.96%
Top LosersW-o-W
Crown Paints-16.25%
Unga Holdings Limited-8.95%
East African Portland-6.84%
Equity Group Plc-5.16%
Car & General-4.91%

Alternative Investments

 Week BeforeWeek After% Change
Derivatives Turnover (million)9.783.44 -64.79%
Derivatives Contracts10043 -57.00%
I-REIT Turnover (million)9.840.28-97.14%
I-REIT Total Deals6135-42.62%

Global and Regional Markets

Global MarketsW-o-W
S&P 5000.51%
Dow Jones Industrial Average (DJI)0.62%
FTSE 100 (FTSE)1.26%
STOXX Europe 6000.31%
Shanghai Composite (SSEC)-0.02%
MSCI Emerging Markets-0.53%
MSCI World Index0.32%
Continental MarketsW-o-W
FTSE ASEA Pan African Index0.68%
JSE All Share1.83%
NSE All Share (NGSE)0.05%
DSEI (Tanzania)-0.85%
ALSIUG (Uganda)-0.75%

European stocks closed the week higher as global sentiment improved on easing concerns about cash-strapped developer China Evergrande and weak German business confidence data, which prompted investors to book some profits after a mid-week rally.

U.S. stocks ended the week higher due to the Federal Reserve’s signal that it will soon unwind its bond buying program, thus boosting shares of banks, energy firms and other economically sensitive companies. The U.S. Federal Reserve said it would likely begin reducing its monthly bond purchases as soon as November and signalled interest rate increases may follow more quickly than expected.

Asia Pacific stocks were mixed at the end of the week, with investors weighing the impact of China’s Evergrande Group’s Financial woes. Although investors breathed a sigh of relief as concerns over Evergrande’s debt woes receded somewhat, it remains unclear if and how the developer will pay the more than $300 billion of liabilities that it owes and their reaction to potential default.

On the global commodities markets, Crude Oil WTI closed the week high by 2.79% and the ICE Brent Crude increased by 3.65%. Gold futures prices also increased by 0.02% to settle at $1,751.70.

Week’s Highlights

  • Kenya’s trade deficit in the first seven months of the year widened by 35.6% to Kshs 740.5 billion compared to a similar period last year, due to weakening of the shilling, on the back of increased demand for imports as various sectors of the economy reopened. Export earnings however, grew at a slower rate of 16% to Kshs 428.2 billion on increased food and other raw materials exports.
  • The Kenya Revenue Authority increased their tax collections by 31.42% to Kshs 247.18 billion in the first two months of the current financial year, compared to Kshs 188.08 billion in a similar period last year. This is due to economic recovery in various sectors such as education and tourism, as well as new taxation measures such as imposition of 20% excise duty on airtime, fees and commissions earned on loans, and reintroduction of 16% VAT on cooking gas.
  • Foreign currency deposits held by Kenyans in local banks declined by 2.6 billion to Kshs 757.73 billion in July, signalling increased usage by importers who had raised their holdings in June. The decline coincided with a 10.6% month-on-month increase in Kenya’s import bill which stood at Kshs 177.2 billion in July compared to Kshs 160.2 billion in June, due to increased cost and volumes of imports.
  • SBG Securities, through its online trading platforms, is facilitating retail shares deals thus saving clients, time spent to queue and trade in shares at the NSE. The platforms enable retail traders to order, monitor in real time market information and sell shares as well as make payments remotely. More than 80% of the deals are done online, compared to about 30% in 2017.
  • Centum Investment Company Plc plans to sell part or all of its shareholding in its property development subsidiary Centum Real Estate Limited valued at Sh16.6 billion in the year ended March, so as to reduce the concentration of its assets in the real estate sector. The money will be reinvested in stocks, bonds and private equity, thus improving their capital gains at the NSE.
  • Shelter Afrique has finished paying up its commercial debts owed to eight lenders even after restructuring them, giving the company the leverage to issue new regional bonds. The company can now raise up to USD 465 million of new debt, based on the lender’s current Equity Capital base of USD 155M and a debt-equity ratio of 0%, and intends to return to the capital markets to raise Kshs 125 billion in local-currency bonds by the end of the year.
  • Kenya Power has withdrawn an application submitted to the Energy and Petroleum Regulatory Authority (EPRA) in 2019 to increase bills by up to a fifth, shifting its focus to lowering costs, curbing electricity theft and recovery of unpaid bills amounting to over KSh27 billion, bringing relief to consumers who are already struggling with the high cost of fuel and cooking gas.

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