Weekly Commentary – 23rd April 2021

Foreign Exchange Reserves

The CBK’s usable foreign exchange reserves remained adequate at USD 7,727 million (4.75 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 depreciated against the Dollar, the Euro and the Sterling Pound. The weakening of the shilling is attributable to increased dollar demand from oil, manufacturing and agricultural importers.

	Week Before	Week After
Dollar	107.06	108.53
Euro	128.15	130.72
Sterling Pound	147.68	150.68

Liquidity

Liquidity in the money markets tightened, mainly due to tax remittances which were partly offset by Government payments. Remittance inflows increased by 13.3% to USD 290.8 million in March 2021 compared to USD 228.8 million in March 2020. Open market operations remained active.

	Week Before	Week After
Interbank rate	4.87%	5.60%
Interbank volume (billion)	14.10	12.25
Commercial banks’ excess reserves (billion)	-6.20	5.00

Fixed Income

T-Bills

The Treasury Bills remained under-subscribed. The under-subscription in T-Bills is attributable to tightened liquidity in the money markets as evidenced by an increase in interbank rates.

T-Bill	Yield (% Rate)		Subscription Rate
	Week Before	Week After	Week Before	Week After
Overall			86.91%	59.79%
91 day	7.11%	7.12%	102.40%	91.49%
182 day	7.94%	7.93%	36.65%	20.05%
364 day	9.40%	9.46%	130.98%	86.86%

T-Bonds

The bonds market had low demand for the months bond offers. Bonds turnover decreased to Sh 17.27 billion from Sh 26.73 billion the previous week.

The Central Bank has issued a new bond FXD1/2021/25 and reopened a previously issued bond, FXD1/2019/15 with effective tenors of 25.0 years and 13.0 years respectively, as it seeks to raise Kshs 30 billion for budgetary support.

In the international market, yields on Kenya’s Eurobonds declined by an average of 13.0 basis points. The yields for Angola’s 10-year Eurobond also declined while that of Ghana increased marginally.

Equities

NASI and NSE 20 increased by 0.32% and 0.28% respectively, while NSE 25 remained unchanged. The performance was driven by gains recorded by large-cap stocks. Top gains were recorded in Bamburi, Diamond Trust Bank Kenya and Safaricom Plc which gained by 6.0%, 3.5% and 1.0% respectively.

The Banking sector had shares worth Kshs 1.1Bn transacted which accounted for 49.71% of the week’s traded value, Manufacturing & Allied sectors represented 9.49% and Safaricom with shares worth Kshs 849M transacted, represented 35.21%.

Top Losers	W-o-W
TP Serena	-9.41%
BAT	-8.68%
Kapchorua Tea	-7.87%
Home Afrika	7.50%
Umeme	-7.33%

Alternative Investments

	Week Before	Week After	% Change
Derivatives Turnover (million)	4.26	8.21	92.56%
Derivatives Contracts	116	210	81.03%
I-REIT Turnover (million)	1.27	4.08	222.27%
I-REIT Total Deals	59	53	-10.17%

Global and Regional Markets

Global Markets	W-o-W
S&P 500	-0.13%
Dow Jones Industrial Average (DJI)	-0.46%
FTSE 100 (FTSE)	-1.15%
STOXX Europe 600	-0.78%
Shanghai Composite (SSEC)	1.39%
MSCI Emerging Markets Index	0.32%
MSCI World Index	-0.25%

Continental Markets	W-o-W
FTSE ASEA Pan African Index	2.21%
JSE All Share	-2.26%
NSE All Share (NGSE)	1.27%
DSEI (Tanzania)	-0.65%
ALSIUG (Uganda)	-2.23%

European stock markets closed the week lower as investors study a slew of corporate earnings, particularly from Daimler. Economic data releases such as the GfK consumer confidence barometer which stood at -15 in April has made Britons to remain cautious about the pandemic and its economic effects. The Pound also strengthened against the Dollar and this has worked against the FTSE 100.

Major indices in the US stock market ended the week low after the reports that President Joe Biden plans to nearly double the capital-gains tax rate to 39.6% for Americans earning more than $1 million a year.

On the global commodities markets, Crude Oil WTI closed the week low by 1.57% and the ICE Brent Crude declined by 0.99%. Gold futures prices decreased marginally by 0.11% to settle at $1,777.00.

Week’s Highlights

• The value of cash circulating outside the banking system, which is an indicator of the prevailing economic activity, has continued to defy the economic hardships to grow by 2% to Kshs 231.37 billion in February. This has however failed to improve the lives of Kenyans whose lives have been adversely affected by the pandemic.

• Kenya’s trade deficit increased by 13.5% to Kshs 198.64 billion in the first two months of the year, mainly attributed to increased expenditure on manufactured materials and fuel imports, despite reduced disruptions in global supply chains and increased cost of shipping in fuel. Increased trade deficit puts pressure on the shilling and slows down creation of new job opportunities.

• Individual investors and private firms have increased their investments in government debt by 41% to Kshs 194.9 billion in the current fiscal year, pointing to the growing popularity of bonds as an investment option among Kenyans since they are less risky. These groups include individuals, SACCOs, self-help groups, educational institutions, listed and private companies.

• KRA intends to impose a 16% VAT on liquefied petroleum gas (LPG) as from July 1st, 2021, pushing up the price of cooking gas by up to Kshs 350. This will mount more pressure to households and consumers that are already struggling in the wake of the pandemic.

• The Central Bank of Kenya has officially revoked Chase Bank’s license and given a go-ahead to liquidate the bank. Kenya Deposit Insurance Corporation has been appointed to oversee the liquidation process.

• NSE has granted EGM securities, an online forex trader, the operating license to trade derivatives contracts at the bourse. EGM Securities becomes the first broker to offer derivatives contracts of blue-chip firms at the NSE.

• Coca-Cola Beverages Africa (CCBA) plans to list its shares in the Amsterdam and Johannesburg Stock Exchanges through an initial public offering (IPO), with Rothschild & Company as the Financial Advisor in the next 18 months. The IPO will allow CCBA to operate as an independent African-focused business.