Foreign Exchange Reserves

The CBK’s usable foreign exchange reserves remained adequate at USD 7,321 million (4.13 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 Ksh 120.85, Ksh 119.51 and Ksh 136.71 respectively. The observed depreciation against the Dollar is attributable to increased Dollar demand from energy and commodity importers.

 YTD ChangeW-o-W Change
Dollar6.82%0.10%
Euro-6.70%2.02%
Sterling Pound-10.26%4.63%

Liquidity

Liquidity in the money markets increased, partly reflecting government payments which offset tax remittances. Open market operations remained active.

 Week (previous)Week (ending)
Interbank rate5.7%5.1%
Interbank volume (billion)8.724.4
Commercial banks’ excess reserves (billion)13.426.2

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 lower demand for the week’s bond offers. Bonds turnover decreased by 10.07% from 15.1B in the previous week to 13.6B. Total bond deals decreased by 19.34% from 486 in the previous week to 392. In the primary bond market, the Central Bank of Kenya released auction results for the two reopened bonds; FXD1/2017/10 and FXD1/2020/15 that remained under subscribed at 47%, receiving bids worth Ksh 18.8B and accepting Ksh 15.1B from a target Ksh 40B. The overall under subscription was mainly attributed to investors’ appetite for higher returns to compensate for rising inflation.

Eurobonds

In the international market, the yields on the 10-year Eurobond for Angola decreased while that for Ghana increased. Yields on Kenya’s Eurobonds generally decreased by 0.90% compared to the previous week, 0.97% month to date and increased 7.80% year to date. Below is a summary analysis of performance for individual bonds.

BondYTD ChangeM-o-M ChangeW-o-W Change
2014 10-Year Issue11.56%-1.45%-1.12%
2018 10-Year Issue7.89%-1.09%-1.00%
2018 30-Year Issue4.99%-0.88%0.97%
2019 7-Year Issue9.23%-0.84%-0.83%
2019 12-Year Issue7.12%-0.95%-0.91%
2021 12-Year Issue5.98%-0.59%-0.59%
Equities

NASI, NSE 20 and NSE 25 decreased by 1.63%, 2.38% and 2.17% respectively compared to last week bringing the year to date performance to -24.40%, -12.41% and -19.21% respectively. The market capitalization also decreased by 1.64% from the previous week to close at 1.97 trillion recording a year to date decline of 24.39%. The performance was driven by losses recorded by large-cap stocks such as KCB Group, ABSA, Equity Group and EABL of 4.46%, 4.37%, 4.20% and 3.52% respectively.

The Banking sector had shares worth Ksh 366M transacted which accounted for 14.65% of the week’s traded value, Manufacturing & Allied sector had shares worth Ksh 110M transacted which represented 4.42% and Safaricom, with shares worth Kshs 1.9B transacted represented 79.68% of the week’s traded value.

Top Gainers and Losers in the Equities Markets

Top GainersYTD ChangeW-o-W
BOC Kenya20.36%9.42%
TPS Serena-8.20%7.69%
EA Portland23.08%7.24%
Kakuzi Plc9.09%6.46%
NCBA Group Plc25.54%5.45%
Top LosersYTD ChangeW-o-W
Sameer Africa2.11%-11.82%
Liberty Kenya-26.63%-10.69%
WPP ScanGroup-24.15%-10.12%
BK Group Plc3.45% -8.40%
Express Kenya Plc-28.78% -7.89%

Alternative Investments

 Week (previous)Week (ending)% Change
Derivatives Turnover (million)2.571.61-37.14%
Derivatives Contracts30313.33%
I-REIT Turnover0.240.16-33.36%
I-REIT Deals203260.00%

Global and Regional Markets

Global MarketsYTD ChangeW-o-W
S&P 500-24.12%1.51%
Dow Jones Industrial Average (DJI)-19.92%1.97%
FTSE 100 (FTSE)-6.85%1.41%
STOXX Europe 600-20.07%0.98%
Shanghai Composite (SSEC)-16.74%0.00%
MSCI Emerging Markets-27.22%2.51%
MSCI World Index-25.41%1.64%
Continental MarketsYTD ChangeW-o-W
FTSE ASEA Pan African Index-26.82%-0.92%
JSE All Share-11.56% 3.29%
NSE All Share (NGSE)10.05%-3.41%
DSEI (Tanzania)-2.67%-1.13%
ALSIUG (Uganda)-13.87%-3.34%

US stocks tumbled on Friday after stronger than expected jobs report by the Labour Department confirmed expectations of further rate hikes. While major averages still ended the week higher, the losses trimmed gains recorded by energy stocks which were supported by rising oil prices. Investors are looking forward to next week’s US consumer price report for indications of whether the consecutive rate hikes delivered by the Fed have dented inflation.

European stocks closed on a week on week high, backed by Energy stocks which gained 5.6% during the week following the decision by OPEC+ to make supply cuts despite concerns of a possible recession and rising interest rates. This was weighed down by financial and industrial stocks which exerted pressure on the benchmark index after US jobs data release.

Asia Pacific stocks closed the week lower, weighed down by consumer and technology stocks as well as a weakening rupee which sank to a new low against the dollar. Investors are responding to the US jobs report, as chances of a bargain looking slim with prices moving higher.

On the global commodities markets, Crude Oil WTI and ICE Brent Crude closed the week higher by 16.54% and 11.32% respectively. Gold futures prices increased by 2.23% to settle at $1,709.30.

Week’s Highlights

  1. The World Bank has adjusted the country’s 2023 growth outlook from a projected 5.5% to 5.0% on the back of rising inflation. Speaking at the Kenya Economic Update, the Bank’s chief economist for Africa, Andrew Dabalen indicated that Kenya’s growth is however set to rebound to 5.3% in 2024. Kenya’s inflation has exceeded the Central Bank of Kenya (CBK) target band of 2.5-7.5%, with reported figures rising from 8.5% in August to a five year high of 9.2% in September. The resulting action by CBK, in agreement with IMF, was an increase in lending rates to 8.25% in a bid to anchor inflation.
  1. KRA announced the exemption of petroleum products from the increase in excise duty tax from inflation adjustment, occasioned by the prevailing high price of fuel in the country in a bid to cushion against further increases. From January 2023, KRA will have the mandate to exempt certain products from the inflation adjusted taxes following changes made through the 2022 Finance Act.
  1. Kenya’s PMI, as released by Stanbic, for the month of September indicates an improvement in business conditions in the private sector for the first time in six months. The index posted at 51.7 in September, up from 44.2 in August, rests above the 50.0 mark signaling improved customer demand and business activity following the end of election period. Improvement in supply chains encourages firms to purchase more units. Expansions were noted particularly in agriculture, wholesale & retail and services categories, while declines were recorded in manufacturing and construction.
  1. The number of non performing loans declined to 14.2% in August from 14.7% in June, reflecting improved efforts by lenders to recover funds. Alternative methods such as negotiations or private settlement are paying off as opposed to recovering through auctions, since auctioneers are having problems disposing off repossessed assets. The sectors with a large number of non performing loans include infrastructure, hospitality and manufacturing due to subdued demand for goods and services as a result of high inflation.
  1. Safaricom’s value at the NSE plunged below Ksh 1 trillion following the flight of foreign investors whose appetite for emerging markets has significantly declined in the wake of rate hikes in the US. This brought its year to date loss to Ksh 548.9 billion, translating to NSE paper loss of about 82%.
  1. Sri Lanka’s inflation rate hit 69.8% in September, up from 64.3% in August highlighting the country’s plight of shortages, price hikes and economic turbulence. While this fresh record would call for a benchmark rate hike, the Monetary Board of the Central Bank of Sri Lanka at its meeting held on 5th October decided to maintain the Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) at their current levels of 14.5% and 15.5% respectively.

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