Foreign Exchange Reserves

The CBK’s usable foreign exchange reserves remained adequate at USD 7,286 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, the Euro and the Sterling Pound to exchange at KES 121.31, KES 121.64 and KES 140.65 respectively. The observed depreciation against the Dollar is attributable to increased Dollar demand from energy and commodity importers.

 YTD ChangeW-o-W Change
Dollar7.22%0.15%
Euro-5.03%2.49%
Sterling Pound-7.67%3.07%

Liquidity

Liquidity in the money markets eased with the average interbank rate declining from 5.2% to 5.0%, as government payments offset tax remittances. Open market operations remained active.

 Week (previous)Week (ending)
Interbank rate 5.2%5.0%
Interbank volume (billion)33.021.1
Commercial banks’ excess reserves (billion)31.3026.0

Fixed Income

T-Bills

T-Bills were under-subscribed during the week with a decrease in the overall subscription rate from 117.93% recorded in the previous week to 75.79%. The 91-day T-Bill received the highest subscription rate at 299.81% while the 182-day T-Bill and 364-day T-Bill had a subscription rate of 21.54% and 40.44% respectively. The acceptance rate increased by 22.00% to close the week at 96.92%.

T-Bonds

In the secondary bond market, there was a higher demand for the week’s bond offers. Bond turnover increased by 95.43% from KES 9.39B in the previous week to KES 18.34B. Total bond deals increased by 65.79% from 342 in the previous week to 567.

In the primary bond market, the government issued a 14-year infrastructure bond, IFB1/2022/14, seeking to raise KES 60 billion. The bond, whose interest rate will be market determined, is on sale from 26th October 2022 to 8th November 2022.

Eurobonds

In the international market, yields on Kenya’s Eurobonds declined by an average 0.61% compared to the previous week, 0.63% month to date and increased 8.13% year to date. The yields on the 10-year Eurobonds for Angola and Ghana also declined. Below is a summary analysis of performance for individual bonds.

BondYTD ChangeM-o-M ChangeW-o-W Change
2014 10-Year Issue11.84%-1.16%-1.09%
2018 10-Year Issue8.27%-0.72%-0.69%
2018 30-Year Issue5.32%-0.55%-0.35%
2019 7-Year Issue9.45%-0.62%-0.74%
2019 12-Year Issue7.71%-0.37%-0.33%
2021 12-Year Issue6.20%-0.37%-0.48%
Equities

NASI and NSE 25 gained by 0.10% and 0.42% respectively while NSE 20 declined by 1.44% compared to last week bringing the year to date performance to -23.14%, -16.89% and -12.23% respectively. Market capitalization gained by 0.10% from the previous week to close at KES 2.0 trillion recording a year to date decline of 23.12%. The performance was driven by gains recorded by large-cap stocks such as Equity Group and KCB Group of 3.20% and 3.15% respectively. These were however weighed down by losses recorded by ABSA and Co-operative of 3.88% and 1.67% respectively.

The Banking sector had shares worth KES 1.2B transacted which accounted for 74.93% of the week’s traded value, Manufacturing & Allied sector had shares worth KES 69.6M transacted which represented 4.36% and Safaricom, with shares worth KES 294M transacted represented 18.44% of the week’s traded value.

Top Gainers and Losers in the Equities Markets

Top GainersYTD ChangeW-o-W
TP Serena4.92%10.73%
Unga6.33%8.89%
Longhorn-7.81%8.61%
Car & General12.81%8.35%
Umeme11.28%6.84%
Top LosersYTD ChangeW-o-W
Eaagads-18.52%-14.73%
Centum-43.34%-9.98%
Britam-25.66%-9.35%
Flame Tree-4.00%-7.69%
NSE-13.50%-7.24%

Alternative Investments

 Week (previous)Week (ending)% Change
Derivatives Turnover (million)0.931.3140.29%
Derivatives Contracts17185.88%
I-REIT Turnover1.100.66-39.83%
I-REIT Deals414612.20%

Global and Regional Markets

Global MarketsYTD ChangeW-o-W
S&P 500-18.67%3.95%
Dow Jones Industrial Average (DJI)-10.18%5.72%
FTSE 100 (FTSE)-6.10%1.12%
STOXX Europe 600-16.17%3.65%
Shanghai Composite (SSEC)-19.72%-4.05%
MSCI Emerging Markets-31.45%-2.25%
MSCI World Index-20.99%4.01%
Continental MarketsYTD ChangeW-o-W
FTSE ASEA Pan African Index-27.59%-0.54%
JSE All Share-10.95%1.01%
NSE All Share (NGSE)2.06%-1.09%
DSEI (Tanzania)-0.91%0.08%
ALSIUG (Uganda)-10.89%0.68%

All major US indices closed higher, with the Dow up for the fourth consecutive week while S&P and Nasdaq on their second straight weekly gains. Energy and industrial stocks outperformed growth stocks, following the release of Q3 earnings reports of several technology stocks. Microsoft, Amazon and Alphabet all recorded steep declines, while Apple’s strong performance helped soften the blow.

European stocks recorded week on week gains but dropped Friday following European Central Bank’s rate hike and weak performance of technology stocks. China’s Covid restrictions weighed heavily on mining, oil and commodity-linked stocks.

Asia Pacific stocks tumbled as China imposed new Covid-19 controls and the rout of US technology stocks spilled over into the market. Technology majors; Alibaba Group, Baidu Inc, Tencent Holdings and JD.com Inc reacted to their exposure in the US market, with their weighting costing Hong Kong’s Hang Seng Index a loss of nearly 8%.

On the global commodities markets, Crude Oil WTI closed the week 3.35% higher, while ICE Brent Crude closed 2.43% higher. Gold futures prices declined by 0.69% to settle at $1,644.80.

Week’s Highlights

  1. The government has announced plans to exempt all first-time home buyers from paying stamp duty, coming after an amendment of the Stamp Duty Act in 2020 to cover only first-time buyers of approved affordable housing units. The move is expected to improve the uptake of pension schemes’ provision towards home ownership and ease costs associated with the purchase amid the rising cost of living.
  1. NSSF increased their ownership stake in KCB Group to 291.35 million shares by purchasing an additional 18.8 million shares worth KES 703 million at the end of September 2022. The fund’s stake has been growing, from 6.12% in March 2019 to 8.48% in June 2022 and 9.07% in September, owing to the consistent stream of dividend income from the lender.
  1. US National Bureau of Economic Research reported that the economy rebounded in the third quarter, with its first positive GDP growth in 2022 of 2.6%, in contrast to a 0.6% decline in the second quarter. The gains were attributed to a narrowing trade deficit, increase in consumer spending, non residential fixed investment and government spending. These were offset by declines in residential fixed investment and private inventory investment.
  1. European Central Bank’s Governing Council announced their decision to raise interest rates by 75 basis points to 1.5%, the third major consecutive policy rate hike, bringing the total increase to 2%. The Council maintains its stance to adjust all the instruments within its mandate to ensure that inflation returns to its 2% medium-term target.
  1. China’s National Bureau of Statistics reported its third quarter gross domestic product (GDP), which grew by 3.9% year-on-year, picking up from 0.4% in the second quarter, bringing year-to-date growth to 3%. While this exceeds the 3.4% market expectations, it falls short of the government’s annual target of around 5.5%. Major growth drivers included industrial production (6.3%), exports (5.7%) and retail sales (2.5%), which were dragged down by the effect of Covid controls and the real estate slump.
  1. IMF released the Regional Economic Outlook for Asia and Pacific, noting that growth is expected to decelerate to 4.0% in 2022 after the strong 6.5% rebound in 2021, before climbing to 4.3% in 2023. The forecasts are a downward revision from April’s World Economic Outlook, by 0.9% and 0.8% respectively. The region’s economies continue to face inflationary pressures as major central banks respond with more stringent monetary policies, as well as rising debt levels which call for continued fiscal consolidation and targeted interventions to mitigate global food and energy shocks.

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