Weekly Commentary – 8th April 2022

Foreign Exchange Reserves

The CBK’s usable foreign exchange reserves remained adequate at USD 8,373 million (4.98 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. However, it gained against the Euro and the Sterling Pound. The observed overall depreciation against the Dollar is attributable to increased Dollar demand from energy and commodity importers.

	Week Before	Week After
Dollar	115.00	115.29
Euro	127.76	125.76
Sterling Pound	150.95	150.78

Liquidity

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

	Week Before	Week After
Interbank rate	4.62%	4.77%
Interbank volume (billion)	14.36	31.31
Commercial banks’ excess reserves (billion)	14.80	14.60

Fixed Income

T-Bills

T-Bills remained under-subscribed during the week with an increase in subscription rate compared to the previous week. Overall increase is attributable to eased liquidity in the money markets.

Top Losers	W-o-W
NBV	-21.84%
Car General	-14.29%
EA Cables	-10.09%
Kapchorua Tea	-9.52%
Olympia	-9.33%

T-Bonds

The bonds market had a higher demand for the week’s bond offers. Bonds turnover rose by 95.2% to 25.80B up from 13.21B in the previous week.

In the primary bond market, the Central Bank released auction results for the three-year bond. The Bond was under-subscribed at 85.11% with Ksh. 34.0B worth of bids against the sought Ksh. 40B. The weighted average interest rate for the accepted bids was 11.8%. Bidding for the 15 year bond is still ongoing until 19th April.

In the international market, yields on Kenya’s Eurobonds rose by an average of 20.7 basis points. The yields on the 10-year Eurobonds for Angola and Ghana also increased.

Equities

NASI, NSE 20 and NSE 25 increased by 0.77%, 0.36% and 0.39% respectively. Market capitalization also increased by 2.26% to 2.499 trillion. The performance was driven by gains recorded by large-cap stocks. Top gains were recorded in ABSA, Safaricom and NCBA which increased by 1.20%, 1.40% and 3.70% respectively.

The Banking sector had shares worth Kshs 420M transacted which accounted for 37.62% of the week’s traded value, Manufacturing & Allied sector had shares worth 88M transacted which represented 7.92% and Safaricom, with shares worth 529M transacted represented 47.46% of the week’s traded value.

Top Losers	W-o-W
Car General	-16.42%
Uchumi	-10.53%
Total	-7.44%
BOC Kenya	-6.25%
Sameer	-6.12%

Alternative Investments

	Week Before	Week After	% Change
Derivatives Turnover (million)	1.46	2.08	42.39%
Derivatives Contracts	10	14	40.00%
I-REIT Turnover	0.44	0.85	93.28%
I-REIT Deals	53	55	3.77%

Global and Regional Markets

Global Markets	W-o-W
S&P 500	-1.27%
Dow Jones Industrial Average (DJI)	-0.27%
FTSE 100 (FTSE)	1.75%
STOXX Europe 600	0.57%
Shanghai Composite (SSEC)	-0.94%
MSCI Emerging Markets	-1.56%
MSCI World Index	-1.47%

Continental Markets	W-o-W
FTSE ASEA Pan African Index	0.47%
JSE All Share	-1.72%
NSE All Share (NGSE)	-0.45%
DSEI (Tanzania)	-0.75%
ALSIUG (Uganda)	-0.62%

U.S stocks closed the week mixed, as gains in the Oil & Gas, Telecoms and Financials sectors led shares higher while losses in the Technology, Consumer goods and Industrial sectors led shares lower.

European stocks closed the week high as investor focus shifted towards the upcoming French presidential elections. Investors have however shown concern on surging inflation as a result of the Ukraine crisis which may trigger the central bank to take measures that will hurt growth. European Union adopted the fifth package of sanction against Russia on Friday including import bans on coal, wood, chemicals and other products.

Asia Pacific stocks closed the week low with investors continuing closely monitoring both the US Federal Reserve’s plan to tighten the monetary policy and the latest COVID-19 outbreak in China.

On the global commodities markets, Crude Oil WTI closed the week lower by 1.55% and the ICE Brent Crude decreased by 1.54%. Gold futures prices increased by 1.17% to settle at $1,941.60.

Week’s Highlights

• The Treasury Cabinet Secretary presented the 2022/2023 Ksh. 3.3 Trillion National Budget on Thursday 7th April. The fiscal deficit stands at Sh. 862.5 Billion which will be financed through net external financing (Ksh. 280.7B) and net domestic financing (Ksh. 581.7B). We noted the following key points:

• The Kenya National Bureau of Statistics announced a rise in inflation for the Month of March to 5.56% up from 5.08% recorded in February mainly driven by increase in food and non-alcoholic beverages (9.92%); furnishings, household equipment and routine household maintenance (6.44%); housing, water, electricity, gas and other fuels (4.91%); and transport. The Consumer Price Index increased by 0.85%.

• The Kenyan Government unveiled a Ksh 5.7 Billion subsidy aimed at funding subsidization for 2.28 Million 50-Kg bags of fertilizer in an attempt to reduce production costs incurred by farmers. The Agriculture Cabinet Secretary attributed current price surge to logistical constraints and restricted exports by major fertilizer exporting companies.

• According to a report by the United Nation’s Food and Agriculture Organization (FAO), world food prices hit an all time high as the Russia-Ukraine war disrupted supplies for staple grains and vegetable oils. FAO’s food index surged by 12.6% in March. Vegetable oils, cereals and meat recorded an all time high. Russia and Ukraine collectively account for 30% and 20% of wheat and maize exports respectively.

• The Johannesburg Stock Exchange (JSE) intends to amend rules to enable listing of actively managed exchange-traded funds (ETFs). Available data shows a strong appetite for actively managed ETFs, with demand expected to surpass the current $ 300 billion in assets under management in the coming years.