Foreign Exchange reserves

The CBK’s usable foreign exchange reserves soared from the previous week to stand at USD 9.26 billion(5.56 months of import cover).This meets CBK’s statutory requirement to endeavour 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 relatively stable against major currencies over the week, trading against the USD at Kshs 106.09 down from Kshs 106.94 recorded last week. However, it declined by 139 basis points against the Sterling Pound to trade at Kshs 132.96.

Liquidity

Liquidity continued to improve from the previous weeks on account of government payments. The weekly mean of the daily weighted average inter-bank rate dipped to 3.12% from 3.44% in the previous week. Nevertheless, the volume transacted declined by 53.2% to stand at Kshs 9.40 billion. Commercial banks’ excess reserves stood at Kshs 32.9 billion.

Fixed Income
T-Bills

T-bills remained oversubscribed at a rate of 209.07%, up from 102.45% in the preceding week. The oversubscription is owed to high liquidity in the money market and investors’ preference for short-term papers. The subscription rates for the 91-day, 182-day, and 364-day papers increased to 255.53%, 213.04%, and 186.50%, respectively. The yields on the 91-day, 182-day, and 364-day papers, decreased marginally by less than 60 basis points to close at 7.33%, 8.20%, and 9.20%, respectively.

T-Bonds

The bonds market registered reduced activity from the previous week with the bonds turnover declining by 30.94% to Kshs 9.49 billion. The total bond deals decreased from 456 to 370. During the week, the National Treasury announced that it will reopen two bonds namely, FXD3/2019/5 and FXD4/2019/10 with effective tenors of 4.5-years and 9.4-years respectively for a total value of Kshs 40.0 billion for budgetary support purposes. Innovative 9.26 billion(5.56 months of import cover).This meets CBK’s statutory requirement to endeavour In the international market, yields on Kenya’s Eurobonds decreased by an average of 21.4 basis points. Similarly, the yields on the 10-year Eurobonds for Angola and Ghana declined

Equities

The Equity Market closed the week with 98.9 million shares valued at Kshs 2.30 billion against 84.8 million shares valued at Kshs 2.37 billion transacted in the previous week. The market capitalization grew marginally by 1.49% to Kshs 2.13 trillion. NASI gained by 1.49%, while NSE 20 and NSE 25 diminished by 0.44% and 0.10%, respectively. The performance of the NASI was driven by gains recorded by large-cap stocks, with Standard Chartered Bank, Safaricom, EABL, NCBA and Co-operative bank gaining by 4.2%, 3.3%, 3.1%, 3.0% and 2.4% respectively. The Banking sector had shares worth Kshs 986 million transacted which accounted for 42.36% of the week’s traded value, Manufacturing & Allied sector represented 6.89% and Safaricom with shares worth Kshs 993 million transacted, contributed 42.65%.

Global stocks markets gained from the previous week ascribed to hopes of a recovery from a coronavirus driven economic slump. The MSCI World Index edged up by 5.53%, while the MSCI Emerging Markets soared by 7.77%. In the USA, DJI and S&P 500 climbed up 6.81% and 4.91%. In Europe, STOXX Europe 600 appreciated by 7.12% and the FTSE 100 went up by 6.71%. China’s Shanghai Composite rose by 2.75%. On the regional front, the FTSE ASEA Pan African index rose sharply by 18.62% to close the week at 2252.50.The JSE All Share gained 8.40%, Nigeria’s NSE All Share dipped slightly by 0.98%. Within the EAC, Tanzania’s DSEI and Uganda’s ALSIUG decreased marginally by 0.71% and 1.40%, respectively.

On the global commodities market, the oil futures experienced rise in prices with the Crude Oil WTI and ICE Brent Crude soaring by 11.44% and 19.73%, respectively. Gold futures prices declined by 3.92% to settle at $1,683.00 at the end of the week, as risk sentiment improved on hopes of economic recovery from the effects of coronavirus.

Alternative Investments

The Derivatives Market closed the week with a total of 4 contracts valued at Kshs 67,600. EABL contract expiring in 17 th September 2020 moved 4 contracts valued at Kshs 67, 000. The I-REIT market registered depressed activity with a turnover of Kshs 1.17 million from 148 unit deals against a turnover of Kshs 2.83 million from 86 unit deals in the preceding week.The ETF market had 3 contracts traded with a value of Kshs 26.23 million.

Week’s Highlights

  • Britam Holdings sold 21.6 million shares of Equity Group valued at Kshs 695.5 Million, in an effort to comply with the Insurance Regulatory Authority (IRA), Guidelines to the Insurance Industry on Management of Investment. The amount invested in Equity Group initially accounted for 11.7% of Britam’s assets, 10 breaching 10.0% limit stipulated in the IRA Guidelines. Following the sale, the proportion of investment in Equity Group has declined to
    6.7%.
  • During the week, Stanbic Bank released their Monthly Purchasing Managers’ Index (PMI). The PMI improved to 36.7 in the month of May,2020, up from 34.8 in the month of April. The figures indicates declining business conditions, albeit slightly better compared to April. A reading below 50 indicates a worsening economic outlook. The economic slump witnessed is engendered by depressed demand and shortages of inputs due to travel restrictions. Employment levels declined with efforts to lower spending and salaries leading to an overall fall in input prices. Subsequently, output sprices were reduced as firms tried to salvage client sales.
  • The Association of Kenya Professional Insurance Agents (AKPIA) entered into a partnership with mTek Services, a digital insurance broker. The move is aimed at promoting uptake of insurance in the face of the pandemic. mTek Services chief executive officer Bente Krogmann said the deal will provide a digital platform which allows insurance agents to onboard clients, manage them and reconcile accounts digitally, going 100 percent paperless.
  • Under the draft 2020 Value Added Tax (Digital Market Supply) Regulation, the Kenya Revenue Authority (KRA) is targeting e-commerce platforms with new taxes to fund Sh3 trillion 2020/2021 budget. The regulation stipulates that downloadable digital contents, subscription based media, software programmes, electronic data management and supply of music, film and games will be taxed. Others include search engines and automated help desk services, online tickets, e-learning platforms, audio, vision or digital media, transport hailing platforms, among
    others.
  • Nigeria-based Platform Capital, a growth markets investor, announced its investment in Lipa Later, a technology-driven, consumer credit platform in East Africa. Lipa Later is unlocking untapped retail potential through financial inclusion, by leveraging data analytics to provide African consumers with access to convenient and affordable credit. Lipa Later is revolutionising how consumers in Africa shop and access credit by providing a risk-free, point-of-sale credit option that allows retailers to sell goods and services in affordable monthly installments The
    company is backed by other investors including Musha Ventures, Majilis Investment, Lateral Capital, and MasterCard (through the Startpath program) and are in advanced discussions with other strategic North American investors to accelerate its expansion.