Weekly Commentary – 17th December 2021

Foreign Exchange Reserves

The CBK’s usable foreign exchange reserves remained adequate at USD 8,643 million (5.28 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 increase in the dollar is attributable to increased dollar demand from oil and energy importers.

	Week Before	Week After
Dollar	112.89	112.96
Euro	127.70	127.87
Sterling Pound	149.03	150.41

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	4.82%	4.30%
Interbank volume (billion)	6.49	19.71
Commercial banks’ excess reserves (billion)	14.20	4.60

Fixed Income

T-Bills

The T-Bills subscription rate improved, remained under-subscribed. The improved subscription in T-Bills is attributable to improved liquidity in the money markets.

T-Bill	Yield (% Rate)		Subscription Rate
	Week Before	Week After	Week Before	Week After
Overall			65.65%	87.39%
91 day	7.28%	7.27%	126.85%	113.32%
182 day	7.98%	7.98%	55.17%	112.15%
364 day	9.09%	9.16%	51.66%	52.26%

T-Bonds

The bonds market had low demand for the months bond offers. Bonds turnover decreased to Kshs 9.41 billion from Kshs 14.40 billion recorded in the previous week.

In the international market, yields on Kenya’s Eurobonds increased by an average of 4.0 basis points. The yields on the 10-year Eurobonds for Ghana and Angola also increased.

Equities

NASI and NSE 25 increased by 0.53% and 0.86% respectively, while NSE 25 decreased by 0.10%. Market capitalization also increased by 0.54% to 2.55 trillion. The performance was driven by gains recorded by large-cap stocks. Top gains were recorded in NCBA, Equity Group and KCB Group which increased by 4.2%, 2.4% and 2.0% respectively.

The Banking sector had shares worth Kshs 607M transacted which accounted for 26.27% of the week’s traded value, Manufacturing & Allied sector represented 0.51% and Safaricom with shares worth Kshs 1Bn transacted, contributed 45.82%.

Top Losers	W-o-W
Kakuzi	-9.09%
Kengen	-8.02%
East African Portland	-6.48%
HF Group	-5.79%
Total Kenya	-3.33%

Alternative Investments

	Week Before	Week After	% Change
Derivatives Turnover (million)	2.63	23.59	797.58%
Derivatives Contracts	17	4	-76.47%
I-REIT Turnover	0.26	0.21	-20.87%
I-REIT Deals	45	39	-13.33%

Global and Regional Markets

Global Markets	W-o-W
S&P 500	-1.94%
Dow Jones Industrial Average (DJI)	-1.68%
FTSE 100 (FTSE)	-0.30%
STOXX Europe 600	-0.35%
Shanghai Composite (SSEC)	-0.93%
MSCI Emerging Markets	-1.80%
MSCI World Index	-1.52%

Continental Markets	W-o-W
FTSE ASEA Pan African Index	-0.88%
JSE All Share	-1.09%
NSE All Share (NGSE)	1.12%
DSEI (Tanzania)	1.39%
ALSIUG (Uganda)	1.25%

U.S stocks closed the week lower following a decline in Financial and energy stocks, as investors continued to assess the threat of the omicron variant.

European stocks closed the week lower as markets adjust to a new reality that central banks are tightening monetary policies, despite the ongoing Covid-induced slowdown. The Bank of England raised interest rates for the first time since the pandemic started and the European Central Bank saying it will end its emergency bond-buying program in three months’ time.

Asia Pacific stocks also closed the week lower even as the recent tighter monetary policies from central banks boosted investor sentiment. Central banks globally are tightening their monetary settings to curb high inflation, while also monitoring the impact from the omicron Covid-19 variant.

On the global commodities markets, Crude Oil WTI closed the week low with 1.13% and the ICE Brent Crude decreased by 2.17%. Gold futures prices increased marginally by 1.13% to settle at $1,804.90.

Week’s Highlights

• The Energy and Petroleum Regulatory Authority (EPRA) has retained the fuel prices in the monthly review to January 14 despite increased landing costs of fuel, offering relief to motorists and households during the festive season. Super petrol, diesel and kerosene will continue retailing at Sh 129.72, Sh 110.60 and Sh 103.54 respectively.

• The World Bank projects that Kenya’s GDP will grow by 5% in 2021 and 4.9% in 2022- one of the fastest recoveries among Sub-Saharan African countries. The rebound will be driven by diversified sources of growth, sound economic policies and the services sector, as employment conditions and household incomes improve above pre-pandemic levels, despite the negative impacts of the Covid-19 pandemic. However, poverty has increased, and the buffers and coping mechanisms of households, firms, and the public finances have been depleted.

• Private sector firms and banks expect the cost of living to go high in the new year, following a surge in food prices and increased demand during the festive season as the economy recovers after full reopening from the Covid-19 restrictions, coupled with the weakening of the Kenyan Shilling against the Dollar, thus affecting the cost of imports.

• The International Air Transport Association (IATA) reported improved recovery in both domestic ad international air Travel. Total demand for air travel in October, measured in revenue passenger kilometers was down 49.4% compared to October 2019, and an improvement from 53.3% fall recorded in September 2021.

• A survey by I&M Burbidge shows private capital investors’ sentiment in East Africa improved in the third quarter of the year compared to the second quarter on the back of improved economic performance, following easing of Covid-19 restrictions in Kenya. However, concerns still remain on the valuation and asset liquidity.