Market Report – Q3, 2024

MACROECONOMIC REVIEW

GDP

Kenya’s GDP growth moderated to 4.6% in Q2 2024, down from 5.0% in Q1, reflecting a broad-based slowdown across key sectors. Notably, the construction and manufacturing sectors showed resilience and the mining & quarrying sector, despite experiencing a contraction, exhibited a significant improvement from Q1 2024.

Currency

The Kenyan Shilling appreciated slightly against the Dollar, but depreciated against the Sterling Pound and the Euro by 0.26%, 5.57% and 3.87% respectively in Q3 2024. The Shilling’s relative stability against the Dollar was supported by adequate foreign exchange reserves, increased diaspora remittances, a surge in exports, rising tourism inflows and a weakening US Dollar. While the Shilling is anticipated to maintain its stability, potential risks include rising debt servicing costs, political uncertainty and increased Dollar demand.

Inflation

Inflation eased further in Q3 2024, ending the quarter at 3.55%. Throughout the quarter, it remained below the CBK’s target range midpoint of 5%. This decline was attributed to stable fuel prices, lower food & electricity costs and the effective implementation of monetary policy measures.

Liquidity

Liquidity in the money markets increased in Q3 2024, as a result of government payments which more than offset tax remittances. The average inter-bank rate declined from 13.48% the previous quarter to 12.95%, while the average inter-bank volume increased by 17.51% to Kshs 26.02 billion. On average, commercial bank reserves on average rose from Kshs 16.11 billion the previous quarter to Kshs 19.19 billion. Open market operations remained active throughout this quarter.

PMI

Kenya’s private sector contracted in Q3 2024. The Stanbic Bank Kenya PMI averaged 47.8, a decline from 49.7 in the previous quarter. July saw the sharpest downturn since April 2021, primarily due to disruptions caused by anti-finance bill 2024 protests, which negatively impacted both output and new orders.

FIXED INCOME

Treasury Bills

T-bills remained oversubscribed during the third quarter of 2024, with the overall subscription rate decreasing from 122.42% in the previous quarter to 115.24%. The performance of the 91-day, 182-day and 364-day papers stood at 351.87%, 82.78% and 53.03% respectively.

Treasury Bonds

In the primary bond market, CBK targeted to raise a total of Kshs 125 billion through re-opened bonds in Q3 2024, a decrease from Kshs 170 billion target in the previous quarter. For treasury bonds, the Central Bank aimed to raise Kshs 60 billion, compared to Kshs 170 billion in Q2 2024. Bids received totaled Kshs 73.61 billion, with Kshs 50.55 billion accepted, resulting in a subscription rate of 122.68% and an acceptance rate of 68.68%. The weighted average rate of accepted bids declined slightly by 0.76% to 17.02%..

Eurobonds

In the international market, yields on Kenya’s Eurobonds declined by an average of 1.61% in Q3 2024, compared to a 1.61% increase in Q2 2024 and a 0.83% decline year-to-date. While yields on Kenyan Eurobonds decreased, it’s worth noting that yields on Angola and Zambia’s 10-year Eurobonds increased during the same period.

EQUITIES

Equities performance during the quarter was mixed. The NASI, a broad market index, lost 2.20% while the NSE 10, NSE 20 and NSE 25 indices recorded gains of 0.66%, 7.19% and 1.33% respectively. The performance was a result of strong gains in large-cap stocks such as Bamburi, KCB and Standard Chartered of 40.55%, 11.04% and 8.25% respectively. However, these gains were weighed down by a significant loss of 13.29% in Safaricom.

For a more detailed report on their performance, download the report here.