Weekly Commentary – 20th August 2021

Foreign Exchange Reserves

The CBK’s usable foreign exchange reserves remained adequate at USD 9,189 million (5.62) 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 commodity and energy importers.

	Week Before	Week After
Dollar	109.20	109.53
Euro	128.11	128.09
Sterling Pound	151.25	150.00

Liquidity

Money markets remained relatively liquid, supported by government payments which partly offset tax remittances. Remittance inflows increased by 21.55% to USD 336.7 million in July 2021 compared to USD 277.0 million in July 2020. Open market operations remained active.

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

Fixed Income

T-Bills

The Treasury Bills became over-subscribed. The over subscription in T-Bills is attributable to improved liquidity in the money market and closure of three bonds offered during the month.

T-Bill	Yield (% Rate)		Subscription Rate
	Week Before	Week After	Week Before	Week After
Overall			29.32%	118.24%
91 day	6.51%	6.53%	70.31%	303.64%
182 day	7.05%	7.12%	31.35%	152.33%
364 day	7.42%	7.42%	10.89%	10.00%

T-Bonds

The bonds market had low demand for the week’s bond offers. Bonds turnover decreased slightly to Kshs 20.83 billion from Kshs 20.86 billion recorded in the previous week.

In the international market, yields on Kenya’s 10 year Eurobond increased by an average of 2.32 basis points. The yields for Angola’s 10-year Eurobond and that of Ghana also increased marginally.

Equities

NASI, NSE 20 and NSE 25 increased by 2.84%, 2.79% and 2.69% respectively. Market capitalization also increased by 2.85% to 2.90 trillion. The performance was driven by gains recorded by large-cap stocks. Top gains were recorded in NCBA, ABSA Bank Plc, BAT Kenya and Safaricom Plc which gained by 6.7%, 3.8%, 3.5% and 3.4% respectively.

The Banking sector had shares worth Kshs 881M transacted which accounted for 19.31% of the week’s traded value, Manufacturing & Allied sector represented 28.56% and Safaricom with shares worth Kshs 2.3B transacted, represented 50.86%.

Top Losers	W-o-W
Nairobi Business Ventures	-14.94%
CIC Insurance	-12.20%
Transcentury Plc	-10.00%
Kakuzi Plc	-9.17%
WPP Scangroup Plc	-7.41%

Alternative Investments

	Week Before	Week After	% Change
Derivatives Turnover (million)	3.00	5.28	75.97%
Derivatives Contracts	71	141	-61.63%
I-REIT Turnover (million)	0.98	7.32	644.93%
I-REIT Total Deals	39	49	-32.76%
Exchange Traded Funds	0	0

Global and Regional Markets

Global Markets	W-o-W
S&P 500	-0.59%
Dow Jones Industrial Average (DJI)	-1.12%
FTSE 100 (FTSE)	-1.81%
STOXX Europe 600	-1.48%
Shanghai Composite (SSEC)	-2.53%
MSCI Emerging Markets	-4.69%
MSCI World Index	-1.44%

Continental Markets	W-o-W
FTSE ASEA Pan African Index	0.13%
JSE All Share	-5.48%
NSE All Share (NGSE)	-0.13%
DSEI (Tanzania)	0.22%
ALSIUG (Uganda)	3.05%

European stocks traded lower, with the U.K’s retail sector in the spotlight after a slump in the country’s retail sales, adding to concerns of a slowing global economic recovery. Concerns that the U.S. Federal Reserve may be on the verge of reining in its pandemic-era monetary stimulus measures made investors more risk averse.

US stocks closed the week lower, on concerns whether the U.S. Federal Reserve could begin tightening its dovish monetary policy sooner than expected. Announcements from a host of Asian nations on the implementation of drastic measures to curb the resurgence of Covid-19 due to the rise of the highly contagious Delta variant, put a damper on stocks associated with economic re-engagement.

Chinese stocks also closed the week low, following a series of Chinese regulatory crackdowns which crushed investors’ confidence. Investors also sold risky corporate debt and the Chinese currency as investors rushed to safety amid global coronavirus concerns, making the Yuan record its biggest weekly loss in two months.

On the global commodities markets, Crude Oil WTI closed the week low by 8.94% while the ICE Brent Crude decreased by 7.66%. Gold futures prices increased by 0.33% to settle at $1,784.00.

Week’s Highlights

• Market Capitalization at the Nairobi Securities Exchange (NSE) has hit an all-time high of Kshs 2.9 trillion, boosted by a rally of Safaricom and bank stocks. This is attributed to a rebounding economic environment and investor confidence in business strategies adopted by firms seeking to recover from the effects of the Covid-19 pandemic. Safaricom stock is benefiting from news of Ethiopia entry and banking stocks are on a rise after the first half year earnings posted double profits.

• Fewer banks anticipate an increase in non-performing loans (NPLs) in the third quarter of the year as compared to the second, citing increased recovery efforts on personal, real estate, transportation and trade loans. Banks have relied on recovery techniques such as auctions to reduce the stock of bad loans while also lending to risky consumers with greater caution.

• The Capital Markets Authority (CMA) is eyeing a proposed new fund to revive corporate bond issuances, either by guaranteeing new issuers, subsidizing issuer costs (which have been cited as a reason why small firms avoid issuing bonds to raise capital) or providing liquidity support at maturity to pay bondholders in the event of issuer distress. The corporate bond market had a portfolio size of Sh71.3 billion and 28 listings in 2014 which has now plummeted to three investment grade bonds and an outstanding value of Sh11.7 billion.

• Hass Consult released the quarterly house price index and land price index for the second quarter of the year. House prices declined by 0.1% and 1.7% over the quarter and over the year respectively. This was due to a decline in high-end apartment pricing. Land prices in Nairobi suburbs and satellite towns increased by 0.3% and 1.1% quarter-on-quarter respectively.

• Kenyan imports increased to KSh992 billion in the first half of 2021 from KSh777 billion in the same period in 2020 as the economy slowly recovered from the pandemic-linked slump experienced last year. According to data from the Central Bank of Kenya (CBK), the value of commercial imports in the six months to June amounted to KSh959 million from KSh752 million last year. Government imports also increased by 34% to Kshs 32.6 billion.