Weekly Commentary – 13th August 2021

Foreign Exchange Reserves

The CBK’s usable foreign exchange reserves remained adequate at USD 9,296 million (5.68) 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, but appreciated against the Euro and the Sterling Pound. This is attributable to increased dollar demand from oil importers.

	Week Before	Week After
Dollar	108.72	109.20
Euro	128.74	128.11
Sterling Pound	151.37	151.25

Liquidity

Money markets remained relatively liquid, supported by government payments which partly offset tax remittances. Open market operations remained active.

	Week Before	Week After
Interbank rate	3.19%	2.75%
Interbank volume (billion)	10.52	13.78
Commercial banks’ excess reserves (billion)	10.60	10.70

Fixed Income

T-Bills

The Treasury Bills remained under-subscribed. The under subscription in T-Bills is attributable to a concurrent bond issue in the market.

T-Bill	Yield (% Rate)		Subscription Rate
	Week Before	Week After	Week Before	Week After
Overall			99.76%	29.32%
91 day	6.51%	6.53%	152.34%	70.31%
182 day	7.05%	7.12%	150.20%	31.35%
364 day	7.42%	7.42%	28.30%	10.89%

T-Bonds

The bonds market had low demand for the week’s bond offers. Bonds turnover decreased to Kshs 20.86 billion from Kshs 21.06 billion previous week.

In the primary market, the Treasury reopened two auctions FXD3/2019/10 and FXD1/2018/20, and issued a new bond FXD1/2021/20 with fixed coupon rates of 12.31%, 13.25% and 13.47% respectively, and effective tenors of 8.1 years, 16.7 years and 20 years respectively. Bids worth Kshs 104.64 billion were received, against the target of Kshs 60 billion, translating to a performance rate of 174.40%. The government rejected high bids and accepted Kshs 80.29 billion bids – an acceptance rate of 133.82%.

In the international market, yields on Kenya’s 10 year Eurobond declined by an average of 2.67 basis points. However, the yields for Angola’s 10-year Eurobond and that of Ghana increased marginally.

Equities

NASI and NSE 25 increased by 1.50% and 0.84% respectively, while NSE 25 decreased by 0.68%. Market capitalization also increased by 0.56% to 2.82 trillion. The performance was driven by gains recorded by large-cap stocks. Top gains were recorded in Safaricom Plc, Equity Group, Co-operative Bank and KCB Group which gained by 2.1%, 2.0%, 1.1% and 0.9% respectively.

The Banking sector had shares worth Kshs 813M transacted which accounted for 33.16% of the week’s traded value, Manufacturing & Allied sector represented 6.79% and Safaricom with shares worth Kshs 1.2B transacted, represented 49.74%.

Top Losers	W-o-W
Nairobi Business Ventures	-14.94%
Home Afrika	-12.20%
Car & General	-10.00%
Olympia Capital	-9.17%
Uchumi	-7.41%

Alternative Investments

	Week Before	Week After	% Change
Derivatives Turnover (million)	4.31	3.00	-30.35%
Derivatives Contracts	110	71	-61.63%
I-REIT Turnover (million)	2.58	0.98	526.27%
I-REIT Total Deals	58	39	-32.76%
Exchange Traded Funds	0	0

Global and Regional Markets

Global Markets	W-o-W
S&P 500	0.71%
Dow Jones Industrial Average (DJI)	0.87%
FTSE 100 (FTSE)	1.34%
STOXX Europe 600	1.25%
Shanghai Composite (SSEC)	1.68%
MSCI Emerging Markets	-0.90%
MSCI World Index	0.87%

Continental Markets	W-o-W
FTSE ASEA Pan African Index	0.33%
JSE All Share	1.22%
NSE All Share (NGSE)	1.86%
DSEI (Tanzania)	-0.04%
ALSIUG (Uganda)	0.53%

European stocks traded higher, and clocked their fourth consecutive week of gains on optimism over a strong earnings season, improved economic data and steady recovery from the pandemic-led economic downturn.

US stocks closed the week higher, and notched a second straight week of gains, buoyed by a climb in Walt Disney shares, but a sharp drop in consumer sentiment kept gains in check. A report from University of Michigan showed consumer sentiment index fell to 70.2, the lowest level in a decade – suggesting the impact of the Delta variant of Covid-19 on consumers. This report sent the yields on the 10-year U.S Treasury note lower and in turn helped lift mega-cap growth names such as Microsoft Corp.

Chinese stocks closed the week high after signs that the U.S. inflation is moderating and concerns over an earlier-than-expected asset tapering by the U.S. Federal Reserve receded.

On the global commodities markets, Crude Oil WTI closed the week high by 0.23% while the ICE Brent Crude decreased by 0.16%. Gold futures prices increased by 0.86% to settle at $1,778.20.

Week’s Highlights

• The Energy and Petroleum Regulatory Authority has retained the prices of super petrol, diesel and kerosene at Kshs 127.1 per litre, Kshs 107.7 per litre and Kshs 97.9 per litre respectively for the period between 15th August and 14th September. This is despite an increase in international oil prices.

• Kenya’s external debt rose to a new high of $37.23 billion in the first half of this year as compared to $33.01 billion during the same period last year, following the government’s increased spending and subdued revenue. According to data from Central Bank of Kenya (CBK), the country’s total debt increased by 15% to Kshs 7.7 trillion at the end of June 2021 from Kshs 6.7 trillion a year earlier, with external debt accounting for 52% of the country’s total debt.

• The claims payment ratio in Kenya’s insurance sector improved in the first quarter of 2021, according to a report released by the Insurance Regulatory Authority (IRA). The report shows that the long-term insurance claims payment ratio improved to 73.7% in the first quarter of 2021, up from 73.1% in the previous quarter. Similarly, general liability claims payment increased to 9.2% in Q4 2020, up from 8.4% in Q4 2019.

• Kenyans will pay more for fuel, cigarettes, bottled drinking water, beer, fruit juice and other excisable products, starting October 1st 2021. This occurs after the Kenya Revenue Authority (KRA) issued a legal notice allowing the Commissioner-General to adjust the prices of these products by 4.97%, referred to as an inflation adjustment on excise duty. The Commissioner is required to adjust the Excise Duty rates on products on an annual basis to account for inflation under the Excise Duty Act of 2015.

• Kenya’s export earnings for the first half of the year reached a 10-year high of Kshs 368.79 billion, boosted by an increase in horticultural sales and rising coffee prices. The earnings represent a 16.27% increase from Ksh317.18 billion over a similar period last year. Despite increased export revenues, Kenya’s trade deficit did not narrow as imports grew at a quicker rate of 27.71% to Kshs 991.75 billion.

• The parliamentary committee has given the Central Bank of Kenya (CBK) express powers to regulate digital lenders, giving the regulator control over their goods, management and sharing of borrower information. The regulator will determine the pricing parameters which will help to reduce the high digital lending rates that have trapped many borrowers in debt.

• The Nairobi Securities Exchange (NSE) has announced a partnership with Safaricom Plc, allowing Kenyans to invest in listed stocks using bonga points. The service will be available to all of its customers, who will be able to redeem their points through ten licensed trading participants. This initiative aims to provide investors with more investment opportunities through convenient and innovative solutions.