Weekly Commentary – 18th March 2022

Foreign Exchange Reserves

The CBK’s usable foreign exchange reserves remained adequate at USD 7,979 million (4.88 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 marginally against the Dollar, the Euro and the Sterling Pound. The observed overall depreciation against the Dollar is attributable to increased Dollar demand from energy and commodity importers.

	Week Before	Week After
Dollar	114.18	114.38
Euro	126.10	126.40
Sterling Pound	150.41	150.45

Liquidity

Liquidity in the money markets eased, supported by tax remittances which partly offset government payments. Open market operations remained active. Remittance inflows in February totaled USD 321.5M a 5.1% decrease compared to January.

	Week Before	Week After
Interbank rate	4.95%	4.30%
Interbank volume (billion)	9.90	17.23
Commercial banks’ excess reserves (billion)	16.90	22.20

Fixed Income

T-Bills

The T-Bills under-subscribed during the week. The highest subscription was recorded in the 364 day paper, which offered higher yields. The over-subscription is attributable to the eased liquidity in the money markets.

T-Bill	Yield (% Rate)		Subscription Rate
	Week Before	Week After	Week Before	Week After
Overall			102.06%	82.83%
91 day	7.21%	7.25%	132.39%	49.46%
182 day	8.03%	8.09%	58.08%	82.38%
364 day	9.77%	9.76%	133.92%	96.62%

T-Bonds

The bonds market had a higher demand for the week’s bond offers. Bonds turnover increased by Ksh 34.2B up from Ksh 17.27B which is a 56.4% increase compared to the previous week.

In the primary bond market, the Central Bank re-opened three previously issued bonds on tap sale; FXD1/2021/05 FXD1/2020/15 and FXD1/2021/25, with tenors to maturity of 4.7 years, 12.9 years and 24.2 years, and coupons of 11.3%, 12.8% and 13.9% respectively. The Government sought to raise Ksh 31.5B for budgetary support.

In the international market, yields on Kenya’s Eurobonds declined by an average of 66.5 basis points. The yields on the 10-year Eurobonds for Ghana increased, while that for Angola decreased.

Equities

NASI, NSE 20 and NSE 25 decreased by 1.36%, 0.22% and 0.52% respectively. Market capitalization also declined by 1.36% to 2.44 trillion. The performance was driven by losses recorded by large-cap stocks. Top losses were recorded in EABL, Safaricom and Bamburi which decreased by 2.30%, 2.80% and 3.10% respectively.

The Banking sector had shares worth Kshs 680M transacted which accounted for 44.65% of the week’s traded value, Manufacturing & Allied sector had shares worth 61M transacted which represented 4.01% and Safaricom, with shares worth 762M transacted represented 50.06% of the week’s traded value.

Top Losers	W-o-W
Sanlam	-13.73%
Standard Group	-11.19%
HF Group	-10.43%
Sasini	-9.37%
Sameer	-7.89%

Alternative Investments

	Week Before	Week After	% Change
Derivatives Turnover (million)	4.15	3.63	12.45%
Derivatives Contracts	39	11	71.79%
I-REIT Turnover	0.36	0.16	55.71%
I-REIT Deals	60	35	41.67%

Global and Regional Markets

Global Markets	W-o-W
S&P 500	6.16%
Dow Jones Industrial Average (DJI)	5.50%
FTSE 100 (FTSE)	3.48%
STOXX Europe 600	5.43%
Shanghai Composite (SSEC)	-1.77%
MSCI Emerging Markets	6.01%
MSCI World Index	3.44%

Continental Markets	W-o-W
FTSE ASEA Pan African Index	0.56%
JSE All Share	1.40%
NSE All Share (NGSE)	-0.33%
DSEI (Tanzania)	-0.47%
ALSIUG (Uganda)	-0.46%

U.S stocks closed the week high, with participants balancing the future path of the Ukraine war after talks between the U.S. and Chinese Presidents. Globally, stocks went up after investors’ sentiments were boosted by the interest repayment of the Russian bond which triggered a shift from the previously desired investments in gold consequently causing a downward trajectory on gold prices.

European stocks closed the week high, as investors focused on Russia-Ukraine peace negotiations and digested the talks between the United States and China. This was further aided by Russia’s payment of $117 M worth of interest due on two sovereign dollar bonds clearing doubts of possible default as a result of harsh sanctions imposed.

Asia Pacific stocks also closed the week mixed, with a rally in Chinese shares in the U.S. cooling. The Chinese markets were down with a slight improvement compared to the previous week as investors assessed the feasibility of Beijing’s pledge to stabilize financial markets and any risks stemming from its close ties with Russia.

On the global commodities markets, Crude Oil WTI closed the week lower by 3.86% and the ICE Brent Crude decreased by 3.97%. Gold futures prices declined by 3.55% to settle at $1,921.55.

Week’s Highlights

• The Energy and Petroleum Regulatory Authority (EPRA) announced new prices for petroleum products during its monthly review. EPRA declared an increase in Diesel and Super Petrol prices by Ksh 5 per liter to Ksh 134.7 and Ksh 115.6 respectively while kerosene remained unchanged at Ksh 129.7 per liter. Citing the announcement, the Kenya Transporters Association (KTA) announced an increase in transport charges beginning Tuesday 15th March.

• The Central Bank has given digital lenders up to six months to acquire new licenses in light of new regulations by the regulator. This follows from an approved law that mandated the Central Bank to regulate the lenders after complains on breach of guidelines on protection of consumer data.

• The Kenya Ports Authority is on the verge of completing construction of the Ksh 32B second container terminal (CT2) with a capacity of handling 450 20ft containers ata a time. This is projected to increase the handling capacity at the port from the current 1.42million to 1.7 million by next year.

• The Treasury has issued Sh. 2 Billion state-backed credit guarantee scheme in an aim to improve loan uptake for micro, small and medium -sized enterprises (MSMEs) from the Sh. 2.1 Billion borrowed in 2021. This guarantee seeks to cushion lenders from the risk of default they are exposed to when issuing credit to the MSMEs.

• In an effort to help accelerate Kenya’s ongoing inclusive and resilient recovery from the COVID-19 crisis, the World Bank approved a $750 million Development Policy Operation (DPO) that will help strengthen fiscal sustainability through reforms that contribute to greater transparency and the fight against corruption.

• The National Oil Corporation was mandated to import 30% of cooking gas in a move to regulate the surging prices of the vital commodity. The National Oil’s quota is aimed at protecting the public from exorbitant prices charged by private importers of the Liquefied Petroleum Prices (LPG) and ultimately the retail prices.