Weekly Commentary – 12th January 2024

Foreign Exchange Reserves

The usable foreign exchange reserves stood at USD 6,829 million (3.70 months of import cover). This falls short of CBK’s statutory requirement to endeavour to maintain at least 4.0 months of import cover as well as the EAC region’s convergence criteria of 4.5 months of import cover.

Currency

The Kenyan Shilling depreciated against the Dollar, the Sterling Pound and the Euro to exchange at KES 159.85, KES 203.24 and KES 174.98 respectively. The observed depreciation against the Dollar is attributed to a high demand from energy and commodity importers.

Liquidity

Liquidity in the money markets slightly tightened, with the average inter-bank rate increasing from 13.42% to 13.44%, as tax remittances more than offset government payments. Open market operations remained active.

Fixed Income

T-Bills

T-Bills remained over-subscribed during the week, with the overall subscription rate increasing to 241.54%, down from 134.50% performance recorded in the previous week. The 91-day T-Bill received the highest subscription rate at 1,114.40% while the 182-day T-Bill and 364-day T-Bill had a subscription rate of 101.02% and 32.90% respectively. The acceptance rate decreased by 17.96% to close the week at 79.29%.

T-Bonds

In the secondary bond market, there was a higher demand for the week’s bond offers. Bond turnover increased by 1,458.27%, from KES 0.65 billion in the previous week to KES 10.09 billion. Total bond deals increased by 86.12% from 209 in the previous week to 389.

In the primary bond market, CBK released auction results for the new 3-year bond FXD1/2024/003 and re-opened 5-year FXD1/2023/005 which sought to raise KES 35.0 billion. The issues received bids worth KES 37.15 billion, representing a subscription rate of 106.15%. Of these, KES 25.02 billion worth of bids were accepted at a weighted average rate of 18.39% and 18.77% respectively.

Eurobonds

In the international market, yields on Kenya’s Eurobonds decreased by an average 0.33% compared to the previous week, but increased 0.26% month-to-date and 0.26% year-to-date. The yields on the 10-year Eurobonds for Angola and Zambia increased. Below is a summary analysis of performance for individual bonds.

Equities

NASI settled 0.27% higher while NSE 20, NSE 25 and NSE 10 settled 0.29%, 0.32% and 0.29% lower compared to the previous week, bringing the year-to-date performance to 0.90%, 0.35%, 1.23% and 1.21% respectively. Market capitalization also gained 0.27% from the previous week to close at KES 1.45 trillion, recording a year-to-date increase of 0.90%. The performance was driven by the gain recorded by Safaricom of 2.21%. This was however weighed down by the losses recorded by other large-cap stocks such as ABSA, KCB and EABL of 3.00%, 2.44% and 2.04%.

The Banking sector had shares worth KES 202.8M transacted which accounted for 29.66% of the week’s traded value, Manufacturing and Allied sector had shares worth KES 18.6M transacted which represented 2.72% and Safaricom, with shares worth KES 248.9M transacted represented 36.39% of the week’s traded value.

Alternative Investments

Global and Regional Markets

The US stock market closed the week in the green zone, as investors assessed the cooler-than-expected producer inflation data that fueled hopes for an early Fed rate cut.

The European stock market was volatile during the week, as investors digested the higher-than-expected U.S. consumer price index (CPI) data, which dashed hopes for a near-term rate cut. However, the technology and retail sectors led with gains, fueled by earnings optimism and strong holiday sales.

Asian stock markets ended the week in the red, mainly weighed down by concerns over a weakening Chinese economy. China’s Producer Price Index (PPI) inflation in China shrank for the 15th consecutive month in December, further fueling investors’ concerns.

Week’s Highlights