Weekly Commentary – 27th August 2021

Foreign Exchange Reserves

The CBK’s usable foreign exchange reserves remained adequate at USD 8,986 million (5.49) 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 commodity and energy importers.

	Week Before	Week After
Dollar	109.53	109.78
Euro	128.09	129.10
Sterling Pound	150.00	150.75

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	3.08%	3.51%
Interbank volume (billion)	8.66	7.77
Commercial banks’ excess reserves (billion)	13.4	13.2

Fixed Income

T-Bills

The Treasury Bills became under-subscribed. The under subscription in T-Bills is attributable to tightened liquidity in the market as well as a concurrent infrastructure bond sale in the primary bond market.

T-Bill	Yield (% Rate)		Subscription Rate
	Week Before	Week After	Week Before	Week After
Overall			118.24%	36.47%
91 day	6.60%	6.74%	303.64%	44.16%
182 day	7.10%	7.20%	152.33%	20.23%
364 day	7.42%	7.49%	10.00%	49.64%

T-Bonds

The bonds market had low demand for the week’s bond offers. Bonds turnover decreased to Kshs 12.79 billion from Kshs 20.83 billion recorded in the previous week.

In the international market, yields on Kenya’s 10 year Eurobond decreased by an average of 6.35 basis points. The yields for Angola’s 10-year Eurobond and that of Ghana also declined marginally.

Equities

NASI, NSE 20 and NSE 25 increased by 0.47%, 0.92% and 0.91% respectively. Market capitalization also increased by 0.47% to 2.92 trillion. The performance was driven by gains recorded by large-cap stocks. Top gains were recorded in ABSA Bank Plc, Standard Chartered Bank Kenya and Equity Group Plc which gained by 8.4%, 3.9%, and 3.3% respectively.

The Banking sector had shares worth Kshs 947M transacted which accounted for 40.25% of the week’s traded value, Manufacturing & Allied sector represented 4.37% and Safaricom with shares worth Kshs 1.2B transacted, represented 51%.

Top Losers	W-o-W
WPP Scangroup Plc	-11.41%
Eaagads Limited	-9.72%
Standard Group Limited	-8.18%
Sasini	-6.75%
East African Portland	-5.31%

Alternative Investments

	Week Before	Week After	% Change
Derivatives Turnover (million)	5.28	3.35	-36.51%
Derivatives Contracts	141	106	-24.82%
I-REIT Turnover (million)	7.32	0.46	-93.67%
I-REIT Total Deals	49	58	18.37%
Exchange Traded Funds	0	0

Global and Regional Markets

Global Markets	W-o-W
S&P 500	1.52%
Dow Jones Industrial Average (DJI)	0.96%
FTSE 100 (FTSE)	0.85%
STOXX Europe 600	0.76%
Shanghai Composite (SSEC)	2.77%
MSCI Emerging Markets	4.25%
MSCI World Index	1.74%

Continental Markets	W-o-W
FTSE ASEA Pan African Index	1.04%
JSE All Share	2.66%
NSE All Share (NGSE)	0.01%
DSEI (Tanzania)	0.05%
ALSIUG (Uganda)	-1.56%

European stocks traded higher, supported by gains in financial and travel related stocks, while investors assessed risks rising from Covid-19 infections globally and easing economic growth. The banking sector rose as it tracked gains in benchmark bond yields.

US stocks closed the week higher as well, following the remarks by by the US Federal Reserve chairman, which calmed fears over the tapering timetable and boosted investor sentiments in the market. This was further boosted by the released economic data which showed that subdued consumer spending and fears due to the Delta variant won’t morph into long term inflation, in line with the Federal Reserve assurances.

In the regional markets, the South African market ended the week higher, boosted by gains in precious metals, resources and banks, as well as remarks of the US Federal Reserve chair which saw money rush back to emerging markets. Powell indicated that the Federal Reserve could begin withdrawing some of its easy-money policies before the end of the year.

On the global commodities markets, Crude Oil WTI closed the week high by 10.30% while the ICE Brent Crude increased by 11.54%. Gold futures prices increased by 1.999% to settle at $1,819.50.

Week’s Highlights

• Banks are in talks with the Central Bank of Kenya (CBK) to reinstate charges on customers’ transfer of money from bank accounts to their mobile money wallets and are hoping to reach an agreement by the end of the year that will allow full or discounted charges. A return of the charges will be a boost to banks who have forgone revenue in an environment of increased digital transactions.

• Congestion at Chinese ports as a result of the two week partial closure of Meishan terminal at Ningbo port, the third largest container port, has triggered anxiety over new price increases for commodities imported into Kenya. In a net import economy, an increase in the cost of goods leads to an increase in input costs for firms, which is passed on to consumers through higher purchasing prices of goods. This has resulted to the shilling weakening to a five month low against the US dollar.

• Investors must have a minimum investment of Ksh1 million to participate in alternative investment funds according to the Capital Markets Authority (CMA). The new alternative funds will allow investors to invest in asset classes that are typically not covered by existing collective investment schemes, such as debt funds, equities and equity linked investments, hedge funds, infrastructure funds and SME funds. The alternative investment fund (AIF) aims sophisticated investors with higher risk appetite, while also diversifying the asset classes available for investors in the country.

• KCB Group has completed the acquisition of Rwandese lender Banque Populaire du Rwanda (BPR) from Atlas Mara Limited, a London-based financial services firm. The acquisition is set to give KCB a larger footprint in retail banking in Rwanda building on its existing corporate business that has been the strength of KCB Bank Rwanda. Kenya’s high rate of financial inclusion and digital banking has forced local lenders to look outside the country’s borders for growth.

• Letshego, a pan African micro lender, has secured a Sh5.49 billion loan from the International Finance Corporation (IFC) to boost affordable housing lending in Namibia with the potential of expanding the partnership to other African countries including Kenya. Letshego will be able to finance up to 4,000 home developers in Namibia with this loan. The firm is the latest among regional institutions to raise billions of shillings from international investors to fund their expansion and ride out the increased economic risks posed by the Covid 19 pandemic.