Foreign Exchange Reserves
The CBK’s usable foreign exchange reserves remained adequate at USD 8,457 million (5.13 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 Euro to trade at Kshs 108.52 and Kshs 127.56 from Kshs 108.49 and Kshs 127.41 respectively. The Shilling strengthened against the Sterling Pound to trade at Kshs 140.09 a decrease of 11 basis points. The increase in the dollar is attributable to subdued dollar demand from importers.
Liquidity
The money market was liquid supported by the decrease in the interbank rate. The interbank rate decreased to 2.36% from 3.54% recorded in the previous week. The interbank volume decreased to Kshs 7.97 billion from Kshs 10.22 billion. Commercial banks’ excess reserves stood at Kshs 14.80 billion which is an increase from Kshs 13.50 billion.
Fixed Income
T-Bills
The T-Bills subscription rate increased to 110.00% up from 64.92% the preceding week and became over-subscribed. The over-subscription in T-Bills is attributable to rising liquidity in the money markets. The 91-day paper was oversubscribed at 186.47% up from 154.65%, the subscription rate for the 182-day and 364-day papers stood at 39.30% and 150.10% respectively. The yields on the 91-day, 182-day and 364-day papers increased marginally to 6.47%, 6.85% and 7.76% from 6.40%, 6.84%, and 7.74% respectively.
T-Bonds
The bonds market had high demand for the months bond offers. Bonds turnover increased with bonds turnover closing in at Kshs 2.96 billion from Kshs 2.71 billion registered in the previous session. Overall subscription rate for all three bonds offered was 184.51%. The three re-opened auctions were, FXD2/2011/20, FXD1/2020/15 and FXD1/2010/15 with fixed coupons of 11.9%, 12.5% & 10.5 and effective tenors of 11.3 years, 15.3 years and 5.3 years, respectively.
Equities
The Equity Market closed the week with 13.7 million shares traded with equity turnover of Kshs 325 million against Kshs 9.6 million shares traded with equity turnover of Kshs 236 million in the previous week. Market capitalization decreased slightly by 0.11% to Kshs 2.15 billion.
NASI, NSE 20 and NSE 25 decreased by 0.11%, 0.84% and 0.51% respectively. The performance of the NASI was driven by declines recorded by large-cap stocks with the top losses being recorded in ABSA Bank, Equity Group, and KCB Group, which declined by 4.1%, 2.9% and 1.0% respectively.
The Banking sector had shares worth Kshs 363m transacted which accounted for 30.67% of the week’s traded value, Manufacturing & Allied sector represented 7.51% and Safaricom with shares worth Kshs 652million transacted contributed 55.20%.
Top Gainers and Losers in the Equities Markets
| Top Gainers | W-o-W |
|---|---|
| CIC Insurance | 9.13% |
| Carbacid | 8.93% |
| EA Portland | 7.74% |
| Olympia | 7.44% |
| Fahari I-REIT | 7.17% |
| Top Losers | W-o-W |
|---|---|
| Uchumi | -10.00% |
| Jubilee | -7.46% |
| Centum | -6.50% |
| BK Group | -4.11% |
| Absa | -4.08% |
Alternative Investments
The derivatives market over the week recorded 6 contracts having a turnover of Kshs 0.22million.
I-REIT market over the week recorded a turnover of Kshs 1.82million with 99 deals which was a decrease from Kshs 2.16million recorded over the close of last week.
The ETF market over the week registered a turnover of Kshs 0.59million with 1 deal which was an increase from Kshs 0.20million with 1 deal over the close of last week.
Global and Regional Markets
| Global Markets | W-o-W |
|---|---|
| S&P 500 | 3.84% |
| Dow Jones Industrial Average (DJI) | 3.27% |
| FTSE 100 (FTSE) | 1.94% |
| STOXX Europe 600 | 2.11% |
| Shanghai Composite (SSEC) | 1.68% |
| MSCI Emerging Markets Index | 3.77% |
| MSCI World Index | 3.61% |
| Continental Markets | W-o-W |
|---|---|
| FTSE ASEA Pan African Index | 1.90% |
| JSE All Share | 0.57% |
| NSE All Share (NGSE) | 5.30% |
| DSEI (Tanzania) | 0.04% |
| ALSIUG (Uganda) | -2.37% |
Global stock markets were relatively calm during the week. This was supported by rising expectations of further fiscal stimulus in the U.S. and increased optimism about the potential outcome of Brexit negotiations.
Concerns remain on the spike in Covid-19 infections in Europe. Additional restrictions are expected to be unveiled in France and UK. These are expected to negatively impact economic activity.
On the regional front, the FTSE ASEA Pan African Index, representing African stock exchanges, increased due to better sentiment on global recovery factors. This was due to an increase in private sector activity due to the easing of lock-down restrictions.
On the global commodities markets, Crude Oil WTI closed the week high with 9.58% and the ICE Brent Crude increased by 9.12%. Gold futures prices increased by 0.98% to settle at $1,926.20.
Brent crude prices rose to trade at $41.3 a barrel. The prices were supported by the news of the discharge of the U.S. President, whose testing positive for COVID-19 made investors risk-averse.
Week’s Highlights
- The Monthly Purchasing Managers’ Index (PMI) for September 2020 was released by Stanbic Bank. It showed an increase to 56.3 up from 53.0 in August 2020. A value above 50 indicates improvements in the market while a reading below 50 indicates a worsening outlook. This was the highest posting since April 2018 indicating a strong improvement in Kenya’s private sector.
- The president signed the 2020/2021 County Revenue Allocation Bill which allowed the Treasury to release billions of shillings to counties. This will likely improve liquidity. The interbank rate decreased by 1.4 percentage points to 2.34 percent since the beginning of this month, indicating reduced demand for funds through this window.
- Treasury has backtracked on a new law that would have barred companies, both foreign and local, from doing business online for non-compliance with tax obligations. Under the new regulations, foreign businesses are required to issue details for registration including website and URLs. The regulations are meant to support digital service tax introduced through the amendments through the Finance Act, 2020.
- IRA has disclosed that a third of Kenya’s insurance companies are not complying with capital requirements. This comes after insurance companies’ net profit grew by 108% to 15.12 billion, while businesses and individuals suffer losses of up to 35.75 billion on non-existent insurance covers following brokers’ failure to remit premiums.
- Kenya has been ranked by UNCTAD as the top nation in Africa and 24th globally where money laundering, tax evasion, and concentration of untaxed wealth is rampant. Digital business models have allowed firms to avoid tax liabilities.
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