Weekly Commentary – 12th May 2023

Top Gainers and Losers in the Equities Markets

• The Energy and Petroleum Regulatory Authority (EPRA) released the retail prices of petroleum products which will be in force from 15th May 2023 to 14th June 2023. The pump price of Super Petrol has increased by KES 3.40 to KES 182.70 per litre, Diesel by KES 6.40 to KES 168.40 per litre and Kerosene by KES 15.19 to KES 161.13 per litre. The susbsidy on Diesel and Kerosene has been removed.

• The National Treasury gazetted the actual revenues and expenditure for the 10 months of the financial year 2022/23 ending 30th April 2023. Total revenue collected during the month amounted KES 1.64 trillion, accounting for 76.64% of the original KES 2.14 trillion estimates for the FY2022/23. The figure lies below the KES 1.78 trillion prorated amount expected for the first ten months of the year. Total expenditure amounted KES 2.32 trillion, translating to 65.37% of the original estimates. The deficit was plugged by a total KES 686.59 billion in financing.

• The Retirement Benefits Authority has granted ICEA Lion Life Assurance regulatory authority to manage Tier II payments (employees earning more than KES 18,000) from businesses who opt out of the National Social Security Fund (NSSF). After Enwealth and CPF Financial Services, this is the third pension provider to receive this approval. This will be accomplished through the use of ICEA’s pension products, which include Individual Pension Plans, Umbrella Retirement Benefits Schemes and Group Retirement Schemes. ICEA aims to assist employers with the opt-out procedure by delivering high-quality assistance and has also hinted at high investment returns.

• The Kenya Revenue Authority (KRA) will implement the eTIMS system on June 1, 2023. This will ensure that all VAT (electronic tax invoice) registered taxpayers generate electronic invoices that are sent to KRA in real-time or near real-time. In accordance with the VAT Regulations 2020, all registered taxpayers are required to accept only electronic tax invoices from registered taxpayers for the purposes of claiming input tax and processing refunds. Non-resident registered suppliers of digital services are exempt from this law but must issue invoices indicating the amount of the supply and the tax imposed. VAT-registered taxpayers who have not complied with the VAT Regulation 2020 will not be awarded Tax Compliance Certificates. Likewise, VAT refunds shall only be processed and paid for taxpayers compliant with the regulations. This move will be critical in increasing revenue collection, which aligns with the government’s intention to collect more.

• National Treasury data indicates China’s funding for the 2023–2024 fiscal year is expected to drop from KES 29.5 billion to KES 1.74 billion. This is as a result of China’s increased caution when lending to Africa due to loan defaulters and borrowing capacity restrictions. On the other hand, the World Bank and the International Monetary Fund (IMF) have expanded funding to Kenya, with the World Bank slated to provide a KES 136.5 billion loan to ease the cash flow issue and increase foreign exchange reserves. According to the IMF, Kenya has applied for a long-term funding facility through the Resilience and Sustainability Trust, which seeks to assist low and middle-income countries in building resilience to external shocks such as the financial crisis, political instability and climate change among others.

• China’s annual inflation rate dipped to 0.1% in April 2023, down from 0.7% in March, falling short of market expectations of 0.4%. This was the lowest result since February 2021, despite a mixed economic recovery following the end of COVID-19 restrictions, with food and non-food prices easing further. Core consumer prices rose 0.7% year on year, a similar rate to March, excluding volatile food and energy prices. Consumer prices fell 0.1% month on month, the third consecutive month of decline, falling short of expectations for a flat result.

• US annual inflation dropped to 4.9% in April 2023 from 5% in March 2023, which was below experts’ expectations of 5% and fell for the tenth straight week. The monthly growth was mostly driven by housing expenses, followed by used vehicles and gasoline. The fall in other energy sector components was more than compensated by the increase in the gasoline index. The Consumer Price Index (CPI) consequently increased to 0.4% in April from 0.1% in March. Although inflation in the US is noticeably lower than in other nations, the Federal Reserve is nevertheless raising interest rates to combat it.

• The Bank of England raised interest rates by 0.25% to 4.5% in May 2023. The action is meant to offset the country’s high inflation, which has pushed borrowing costs to their highest level since 2008. The central bank expects core inflation to fall to 5.1% in Q4 2023, a lower forecast from the 3.9% projection in February for the same time period and is expecting to reach the 2% objective by late 2024. Policymakers continue to closely monitor inflationary pressure indicators such as labour market tightness, wage growth behaviour and service price inflation. More tightening of monetary policy would be required if persistent pressure is observed.