Monthly Market Commentary – September 2021

ECONOMIC INDICATORS

Foreign Exchange Reserves

During the month, the CBK’s usable foreign reserves increased by 5.02% to stand at USD 9.44 billion(5.77 months of import cover). However, this meets the CBK’s statutory requirement to endeavour to maintain at least 4 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 USD by 0.56%, exchanging at Kshs 110.49 at the end of the month up from Kshs 109.87 in the previous month. The depreciation is due to increased import activities coupled with increased dollar demand across various sectors including energy while there is low inflows from export activities.

USD Vs KSHS

STERLING POUND Vs KSHS

Inflation

The overall year-on-year inflation increased to 6.91% in the month of September up from a revised figure of 6.57% in August. The increase is attributable to an increase in Food and Non-Alcoholic Drinks Index by 10.63%, Transport by 9.21% and Housing, Water, Electricity, Gas and Other Fuels Index by 6.08%.

INFLATION EVOLUTION

YIELD CURVE

EQUITIES

During the month of September, the market capitalization declined by 2.21% to Kshs 2.78 trillion. In addition, total shares traded and equity turnover plunged by 20.0% and 44.1% respectively to 14.9 million shares and Kshs 443.8 million. NASI and NSE 25 declined by 2.2% and 2.6% in that order, while NSE 20 gained by 0.51% on a monthly basis. On a weekly basis, the NASI gained by 0.28% while NSE20 and NSE 25 declined by 0.42% and 0.10% respectively. The gain in NASI is a result of an appreciation of large-cap stocks such as Safaricom, Co-operative Bank and BAT which gained by 3.3%, 1.5% and 1.1% respectively.

NASI, FTSE NSE 15 and FTSE NSE 25

NSE 20 and NSE 25

Liquidity

During the month, liquidity tightened due to the build-up of bank balances ahead of the quarter-end reporting as well as anticipatory quarterly tax remittances. The inter-bank rate increased to 6.61% up from 3.36%. The volume of inter-bank transactions increased from Kshs 12.46 billion to Kshs 16.15 billion. Commercial banks’ excess reserves decreased to Kshs 10.60 billion.

INTER-BANK RATE and VOLUME

FIXED INCOME

T-Bills

The T-bills recorded an overall subscription rate of 57.95% at the end of the month of September, compared to 71.26% recorded in the previous month. The under-subscription is partly attributable to investor shift to the bond market. The performance of the 91-day, 182-day and 364-day papers stand at 97.9%, 60.8% and 39.2% respectively. On a monthly basis, the yields on the 91-day, 182-day and 364-day papers increased by 2.28%, 1.21% and 6.10% respectively to 6.90%, 7.28% and 7.95%.

T-BILLS

T-Bonds

At the end of the month, the T-Bonds registered a turnover of Kshs 114.7 billion from 2,586 bond deals. This represents a monthly increase of 28.9% and 38.2% respectively. The yields on government securities in the secondary market remained relatively stable during the month of September.

In the international market, yields on Kenya’s Eurobonds increased by an average of 11.7 basis points.

ALTERNATIVE INVESTMENTS

• The derivatives market over the month recorded 252 contracts having a turnover of Kshs 21.9 million which was a decrease from 254 contracts having a turnover of Kshs 40.6 million recorded over the last month.

• I-REIT market over the month recorded a turnover of Kshs 27.0 million with 210 deals which was an increase from Kshs 11.4 million with 224 deals recorded over the last month.

• The ETF market over the month recorded a turnover of Kshs 63.5 million with 2 deals which was an increase from the previous month which recorded no activity.

GLOBAL AND REGIONAL MARKETS

• During the month, major global markets declined as concerns that higher inflation, supply shortages and China’s property sector woes would put global economic recovery at risk. Investors in the USA are focusing on Treasury yields as a key factor in determining how stocks will fare the rest of the year. In the USA, the S&P 500 and Dow Jones indices declined by 4.76% and 4.29% respectively from the previous month. In Europe, the continental index of STOXX Europe 600 and the UK’s FTSE 100 declined by 3.41% and 0.47% respectively.

• On a regional front, market performance was mixed. The FTSE ASEA Pan African index, representing the overall African markets, gained by 2.19% from the month of August. South Africa’s JSE All Share declined by 5.20% while Nigeria’s All Share Index rose by 2.55%. In addition, Tanzania’s DSEI and Uganda’s All Share Index declined by 2.40% and 4.00%.

• On the global commodities markets, oil was steady ahead of a meeting by OPEC and its allies which may determine whether a recent rally in prices amid supply shocks and a recovery from the Covid-19 pandemic will be sustained. The Crude Oil WTI futures gained by 9.53% from the previous month of August. In addition, the ICE Brent Crude Oil increased in value by 7.58%.