Weekly Commentary – 14th January 2022

Foreign Exchange Reserves

The CBK’s usable foreign exchange reserves remained adequate at USD 8,764 million (5.36 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 commodity importers.

	Week Before	Week After
Dollar	113.22	113.37
Euro	128.04	129.49
Sterling Pound	153.11	155.13

Liquidity

Liquidity in the money markets improved, supported by government payments including Term Auction Deposits, which partly offset tax remittances. Remittance inflows in December 2021 increased by 17.0% to hit an all-time record of USD 350.6 million, compared to USD 299.6 million in December 2020. Open market operations remained active.

	Week Before	Week After
Interbank rate	4.46%	4.00%
Interbank volume (billion)	13.93	15.69
Commercial banks’ excess reserves (billion)	20.30	17.10

Fixed Income

T-Bills

The T-Bills became over-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			96.61%	156.37%
91 day	7.35%	7.31%	141.33%	110.10%
182 day	8.04%	8.08%	63.64%	137.22%
364 day	9.44%	9.47%	112.00%	194.00%

T-Bonds

The bonds market had high demand for the months bond offers. Bonds turnover increased to Kshs 19.23 billion from Kshs 3.09 billion recorded in the previous week.

In the international market, yields on Kenya’s 10-year bond issued in 2014 remaining unchanged at 4.4%. Yields on the 10-year and 30-year bonds issued in 2018, the 7-year and 12-year bonds issued in 2019 and the yield on the 12-year bond issued in 2021 all increased by 0.1% points to 6.1%, 8.3%, 5.8%, 6.9% and 6.8%, from 6.0%, 8.2%, 5.7%, 6.8%, and, 6.7% respectively.

Equities

NASI, NSE 20 and NSE 25 decreased by 3.87%, 1.07% and 3.51% respectively. Market capitalization also decreased by 3.88% to 2.57 trillion. The performance was driven by losses recorded by large-cap stocks. Top losses were recorded in Equity Group Holdings, Safaricom Plc, East African Breweries Limited and KCB Group which decreased by 6.6%, 5.1%, 3.9% and 1.8% respectively.

The Banking sector had shares worth Kshs 495M transacted which accounted for 31.42% of the week’s traded value, Manufacturing & Allied sector represented 11.17% and Safaricom with shares worth Kshs 854M transacted, contributed 54.30%.

Top Losers	W-o-W
Sanlam Kenya	-9.09%
Kakuzi	-8.33%
Express Kenya	-7.69%
Equity Group	-6.60%
Sameer	-6.12%

Alternative Investments

	Week Before	Week After	% Change
Derivatives Turnover (million)	2.22	1.26	-43.33%
Derivatives Contracts	18	20	11.11%
I-REIT Turnover	0.60	0.29	-52.36%
I-REIT Deals	76	44	-42.11%

Global and Regional Markets

Global Markets	W-o-W
S&P 500	-0.30%
Dow Jones Industrial Average (DJI)	-0.88%
FTSE 100 (FTSE)	0.77%
STOXX Europe 600	-1.05%
Shanghai Composite (SSEC)	-1.63%
MSCI Emerging Markets	2.56%
MSCI World Index	-0.14%

Continental Markets	W-o-W
FTSE ASEA Pan African Index	1.64%
JSE All Share	1.78%
NSE All Share (NGSE)	1.37%
DSEI (Tanzania)	-1.18%
ALSIUG (Uganda)	-3.87%

U.S stocks closed the week lower following a decline in Consumer Services, Financial and Industrial stocks. Investors were disappointed by fourth quarter results from big U.S. banks which cast a shadow over the earnings season kick-off, and they became cautious of how interest rate hikes would affect the economy.

European stocks closed the week mixed, following hawkish comments from Federal Reserve policymakers pointing to imminent interest rate hikes. The positive news of U.K’s economy growing helped the FTSE 100 outperform its main European peers.

Asia Pacific stocks also closed the week lower, after U.S. Federal Reserve officials indicating faster-than-expected interest rate hikes, which could push investors toward value stocks that tend to be more cyclical and offer near-term cash flows.

On the global commodities markets, Crude Oil WTI closed the week high with 6.24% and the ICE Brent Crude increased by 5.27%. Gold futures prices increased marginally by 1.06% to settle at $1,816.50.

Week’s Highlights

• The Energy and Petroleum Regulatory Authority (EPRA) has retained fuel prices for another month with super petrol retailing, diesel and kerosene retailing at Sh129.72 per litre, Sh110.60 per litre and Sh103.54 per litre respectively, despite decreased landing costs of fuel in the month of December. Super petrol declined by 4.11%, while diesel and kerosene decreased by 5.71% and 4.89% respectively over the same period.

• The Kenya Revenue Authority has surpassed its revenue target in the first half of the current financial year by collecting sh 976.66 billion against a target of sh 929.13 billion. The improvement is attributed to increased tax compliance and economic recovery from the pandemic-induced slump. The best performing collections were from Customs which increased due to 25.4% increase in trade taxes and 9.6% growth in petroleum taxes.

• The Kenya Mortgage Refinance Company (KMRC) won’t budge to take an additional sh 15 billion loan from the Treasury for mortgage refinancing and technical assistance to eligible participating financial institutions. Additionally, the Capital Markets Authority has approved the issuance of an unsecured Sh 10.5 billion to facilitate funding of affordable housing through the Capital Markets and support the Affordable Housing pillar of the Big Four Agenda.

• The High court has temporarily put a ban on proposed increase of motor vehicle insurance premiums by up to 50% for motor vehicles that are older than 12 years or with a value of less than Sh600,000, pending the determination of a case filed by a lobby group. The lobby group rushed to court, accusing the Insurance Regulatory Authority (IRA) of failing to protect the public and policyholders from such an increase.

• Insider fraud in insurance companies increased by 1340% to sh 258.4 million in 2020 from sh 19.2 million in 2019, according to the report by the Insurance Regulatory Authority (IRA). In general, fraud cases jumped 53% to 127 cases worth sh 327.7 million, with the main cases being motor vehicle, medical cases, theft by agents and insider fraud.

• Centum Real Estate Limited has signed an agreement with Global Emerging Markets (GEM) Global Yield, to provide it with a share subscription facility of upto Ksh 17 billion after a public listing. The 3-year term facility will allow the real estate firm to draw down funds by issuing shares of common stock to GEM.