Foreign Exchange reserves

The CBK’s usable foreign exchange reserves remained adequate at USD 9.278 billion(5.58 months of import cover) but declined from the previous week level of USD 9.302 billion(5.59 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 remained stable against major currencies over the week and appreciated against the USD to trade at Kshs 106.29 from Kshs 106.50 recorded last week. It appreciated by 160 basis points against the Sterling Pound to trade at Kshs 132.76 and 126 basis points against the Euro to trade at Kshs 119.46.

Liquidity

Liquidity continued to improve from the previous weeks on account of government payments which offset tax receipts. The weekly mean of the daily weighted average inter-bank rate increased to 3.16% from 2.58% in the previous week. The volume transacted increased by 24.61% to stand at Kshs 3.8 billion. Commercial banks’ excess reserves stood at Kshs 39.10 billion which has been attributed to the reduced Cash Reserve Ratio (CRR) to 4.25% from the initial rate of 5.25%.

Fixed Income
T-Bills

T-bills remained oversubscribed declining from 290.51% in the preceding week to 188.36%. The over-subscription is owed to high liquidity in the money market and investors’ preference for short-term papers. The subscription rates for the 91-day paper increased to 334.40% while the 182 day and 364 day paper declined to 130.60%, and 187.80%, respectively. The yields on the 91-day, 182-day, and 364-day papers, decreased marginally by 219 bps, 444 bps and 365 bps to close at 7.1%, 7.7%, and 8.7%, respectively.

T-Bonds

The bonds market turnover declined by 22.86% to Kshs 2.27 billion from Ksh.2.94 billion the previous week. The total bond deals increased from 94 to 100. In the international market, yields on Kenya’s Eurobonds decreased by an average of 35.3 bps. Similarly, the yields on the 10-year Eurobonds for Angola and Ghana declined.

Equities

The Equity Market closed the week with 41.63 million shares valued at Kshs 936 million against 47.8 million shares valued at Kshs 1.11 billion transacted in the previous week. The market capitalization grew marginally by 1.19% to Kshs 2.21 trillion. NASI gained by 1.19% and NSE 25 by 1.41% respectively while NSE 20 declined by 2.10%. The performance of the NASI was driven by gains recorded by large-cap stocks, with Safaricom, Co-operative Bank, KCB Group ,Equity Group and EABL and Equity Group. During the week , foreign investors turned net sellers and this was evidenced by the decline in equity turnover of 15.94%.

Global stocks markets soared from the previous week despite Covid-19 uptick worries in reopened states in the US and abroad. The MSCI World Index peaked 1.45%, while the MSCI Emerging Markets soared by 2.06%. DJI and S&P 500 increased at week end by 1.04% and 1.86% following the monetary stimulus from the Federal Reserve and the US government boosted investor risk appetite. In Europe, STOXX Europe 600 appreciated by 3.22% and the FTSE 100 went up by 3.07%. China’s Shanghai Composite rose by 1.92%.

On the regional front, the FTSE ASEA Pan African index rose by 1.47%. The JSE All Share also rose by 0.99%, Nigeria’s NSE All Share declined slightly by 1.41%. Within the EAC, Tanzania’s DSEI and Uganda’s ALSIUG increased marginally by 1.48% and 1.73%, respectively.

On the global commodities market, the oil futures increased in prices with the Crude Oil WTI and ICE Brent Crude rising by 8.96% and 8.32%, respectively. Gold futures prices rose slightly by 0.89% to settle at $1753.00 at the end of the week.

Alternative Investments

The Derivatives Market closed the week with a total of 65 contracts valued at Kshs 1.89 million. All Single stock futures and index contracts next expiry date is on September 17, 2020.The I-REIT market registered a slight increase in activity with a turnover of Kshs 950,816 and 33 total deals against a turnover of Kshs 1.46 million and 29 unit deals in the preceding week.

Week’s Highlights

  • The prices of a wide range of goods including beer as well as fuel will rise in line with the tax law that demands excise duty to be revised upwards in line with average inflation rate for the last 12 months to June. The National Assembly’s finance committee however, amended the finance bill that requires the taxman to seek parliamentary approval first before the bill can be effective.
  • The Energy and Petroleum Regulatory Authority (EPRA) released their monthly statement on the maximum retail prices in Kenya in which the Petrol Prices increased to Ksh. 89.1 per liter from Ksh. 83.3 per liter prior. Diesel and Kerosene prices declined to Ksh. 74.6 per litre and 62.5 per liter receptively from Kshs. 78.4 per litre and Ksh.79.8 per liter respectively.
  • On Tuesday, 16 June 2020, Jamii Bora issued a statement that it had received a binding offer from Co-operative Bank of Kenya to acquire 100% stake. A special general meeting will be held on July 1, 2020 to obtain requisite shareholder approval.
  • The World Investment Report published on Tuesday, 16 June 2020 by United Nations Conference on Trade and Development (UNCTAD) shows that Kenya’s Foreign Direct Investment (FDI) inflows were Kshs. 141.84 billion in 2019 compared to Kshs.173.15 billion in 2018 reflecting a 18% drop. The drop partly reflect depressed growth in new jobs that has been worsened by the global corona virus pandemic.
  • The National Assembly Departmental Committee on Finance and National Planning in their submission of a report on the consideration of the Finance Bill 2020 made the following proposals:
    • Rejected proposal to tax pension hence retaining the income tax exemption on pension for persons above 65 years of age.
    • Similar to listing above , rejected proposal to tax income on the National Social Security Fund.
    • Maintained that liquefied petroleum gas(LPG) and propane should remain Zero rated to make it cheaper and more affordable
    • Adopted the proposed amendment to include the supply of maize flour ,cassava flour and wheat or meslin flour as zero rated products to make it affordable to Kenyans.
    • Removed exercise duty on betting since it had a negative effect on the industry and led to closure of betting companies while international players continue to operate within the country.