Weekly Commentary – 22nd April 2022

Foreign Exchange Reserves

The CBK’s usable foreign exchange reserves remained adequate at USD 8,485 million (5.04 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 observed overall depreciation against the Dollar is attributable to increased Dollar demand from energy and commodity importers.

	Week Before	Week After
Dollar	115.44	115.60
Euro	125.16	125.66
Sterling Pound	150.16	150.89

Liquidity

Liquidity in the money markets tightened, partly reflecting government payments which offset tax remittances. Open market operations remained active.

Diaspora remittances for the month of March stood at $363.58M representing a 25.04% and 13.08% change year on year and month on month respectively.

	Week Before	Week After
Interbank rate	4.47%	4.56%
Interbank volume (billion)	14.48	26.18
Commercial banks’ excess reserves (billion)	15.30	29.80

Fixed Income

T-Bills

T-Bills remained under-subscribed during the week with an increase in subscription rate compared to the previous week. The acceptance rate increased by 0.75% to close the week at 99.96%.

T-Bill	Yield (% Rate)		Subscription Rate
	Week Before	Week After	Week Before	Week After
Overall			48.17%	98.86%
91 day	7.42%	7.45%	119.98%	204.30%
182 day	8.32%	8.37%	26.01%	90.19%
364 day	9.75%	9.76%	42.52%	65.35%

T-Bonds

The bonds market had a lower demand for the week’s bond offers. Bonds turnover fell by 56.2% to 7.98B down from 18.23B in the previous week.

In the primary bond market, sale of the 15-year bond attracted bids worth Ksh 32.55B against the targeted Ksh 30B. However, the acceptance rate stood at 84.92% translating to Ksh 27.64B as investors sought higher yields citing inflation and high exposure to forex risks. The market set a coupon rate of 13.94%.

In the international market, yields on Kenya’s Eurobonds rose by an average of 20.7 basis points. The yields on the 10-year Eurobonds for Angola increased while that for Ghana decreased.

Equities

NASI, NSE 20 and NSE 25 decreased by 2.13%, 1.00% and 1.69% respectively. The market capitalization also decreased by 2.13% to 2.414 trillion. The performance was driven by losses recorded by large-cap stocks. Top losses were recorded in East Africa Breweries Ltd, Safaricom and Co-operative Bank which decreased by 3.50%, 2.29% and 0.39% respectively.

The Banking sector had shares worth Kshs 505M transacted which accounted for 26.06% of the week’s traded value. Manufacturing & Allied sector had shares worth 48M transacted which represented 2.48% and Safaricom, with shares worth Kshs 1.2M transacted represented 65.66% of the week’s traded value.

Top Losers	W-o-W
Car General	-25.63%
Uchumi	-10.53%
Liberty	-7.74%
Kenya Power	-6.67%
Scan Group	-6.48%

Alternative Investments

	Week Before	Week After	% Change
Derivatives Turnover (million)	1.50	2.26	50.64%
Derivatives Contracts	27	25	-7.41%
I-REIT Turnover	0.29	0.165	-43.44%
I-REIT Deals	37	41	10.81%

Global and Regional Markets

Global Markets	W-o-W
S&P 500	-2.75%
Dow Jones Industrial Average (DJI)	-1.85%
FTSE 100 (FTSE)	-1.24%
STOXX Europe 600	-1.42%
Shanghai Composite (SSEC)	-3.87%
MSCI Emerging Markets	-3.35%
MSCI World Index	-2.61%

Continental Markets	W-o-W
FTSE ASEA Pan African Index	0.65%
JSE All Share	-1.65%
NSE All Share (NGSE)	1.89%
DSEI (Tanzania)	-0.56%
ALSIUG (Uganda)	-0.81%

U.S stocks closed the week low, as loss in Telecoms, Basic Materials and Healthcare sectors led shares lower. This follows from a decline in quarterly earnings from corporate and growing worries about aggressive Federal Reserve rate hikes. This was worsened by expectations that the Federal Reserve is set for tighter monetary policy following hawkish remarks from the Chairman.

European stocks closed the week low as investors cautiously anticipated the likelihood of slowing economic growth on the back of aggressive monetary policy tightening as well as the impact of the war in Ukraine. The world’s major central banks are looking to tighten monetary policy to combat soaring inflation.

Asia Pacific stocks closed the week low as Investors braced for more aggressive monetary policy tightening by the U.S Federal Reserve. The Chinese markets was down as COVID-19 lock down continued to send shocks across the market coupled by rapid interest rates hikes. Japan, Australia, Hong Kong’ and South Korea also reported a decrease.

On the global commodities markets, Crude Oil WTI closed the week higher by 9.43% and the ICE Brent Crude increased by 8.68%. Gold futures prices increased by 1.72% to settle at $1,974.90.

Week’s Highlights

• The world bank has projected a drop in the African economic growth by 0.6% from 4.1% to 3.4% citing economic shocks including effects of new COVID-19 variants, inflation, supply disruptions, rising public debt, climate shocks and a general slowdown in the global economy, especially in the US and China. However, the Ukraine war will see increased economic activity in resource rich countries according to the report.

• In an aim to boost tracking of performance of listed companies, the Zambian Stock Exchange has announced the introduction of Exchange Traded Funds and Agriculture indices. The profiles of the indices are with effect from April 1, 2022.

• The IMF’s World Economic Outlook (WEO) for April 2022, projects the global output to slow from an estimated 6.1 percent in 2021 to 3.6 percent in 2022 and 2023. This Outlook is 0.8 percentage points and 0.2 percentage points lower for 2022 and 2023 respectively, than in the January WEO update. The weaker growth is attributed to increased geopolitical tension emanating from the war in Ukraine as well as the high uncertainty on the future path of the COVID-19 pandemic.

• Uganda has asked Kenya to allocate it fixed monthly transit petroleum product quotas to ease shortages amid growing anxiety in Kampala over a fuel crisis. Uganda wants 110,660 cubic meters of gasoline, 110,400 cubic meters of diesel, and 12,000 cubic meters of aviation fuel shipped through Kenya monthly.

• The National Assembly Committee on Finance and National Planning declined a petition by representatives of teachers asking Parliament to compel the Central Bank of Kenya (CBK) to give the bank a Ksh 2 billion interest-free loan. The committee highlighted that CBK is currently pursuing other ways to save the bank.

• Google has opened its first product development center in Africa based in Nairobi aiming at building products for the African and global markets besides creating jobs.