Weekly Commentary – 29th April 2022

Inflation

The Kenya National Bureau of Statistics indicated a rise in inflation from 5.56% in March to 6.47% in April on the back of high fuel prices, expensive foodstuff and other utilities during the month. This brings the rate to a seven months high since September 2021.

Foreign Exchange Reserves

The CBK’s usable foreign exchange reserves remained adequate at USD 8,427 million (5.01 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, but gained against 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	115.60	115.77
Euro	125.66	122.83
Sterling Pound	150.89	146.09

Liquidity

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

	Week Before	Week After
Interbank rate	4.56%	4.76%
Interbank volume (billion)	26.18	17.05
Commercial banks’ excess reserves (billion)	29.80	25.30

Fixed Income

T-Bills

T-Bills were over-subscribed during the week. The highest subscription rate was recorded in the 91-day paper. 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			98.86%	117.37%
91 day	7.45%	7.50%	204.30%	254.56%
182 day	8.37%	8.46%	90.19%	87.01%
364 day	9.76%	9.78%	65.35%	92.86%

T-Bonds

The bonds market had a higher demand for the week’s bond offers. Bonds turnover increased by 73.4% to 13.84B up from 7.98B in the previous week.

In the primary bond market, the central bank reopened the 25-year bond; FXD1/2021/25 and offered a new 10-year bond; FXD1/2022/10 seeking to raise Kshs. 60 billion for budgetary support. The 25-year bond will offer coupons at 13.924%. Bidding will run through to 10th May 2022.

In the international market, yields on Kenya’s Eurobonds rose by an average of 68.5 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 3.02%, 2.86% and 4.13% respectively. The market capitalization also decreased by 3.03% to 2.341 trillion. The performance was driven by losses recorded by large-cap stocks. Top losses were recorded in ABSA, KCB, Standard Chartered Bank and Safaricom which decreased by 20.79%, 12.91%, 11.38% and 1.46% respectively.

The Banking sector had shares worth Kshs 530M transacted which accounted for 54.77% of the week’s traded value. Manufacturing & Allied sector had shares worth 30.9M transacted which represented 3.20% and Safaricom, with shares worth Kshs 370M transacted represented 38.25% of the week’s traded value.

Top Losers	W-o-W
ABSA	-20.79%
Car General	-15.97%
KCB	-12.91%
Stanchart	-11.38%
BAT	-11.12%

Alternative Investments

	Week Before	Week After	% Change
Derivatives Turnover (million)	2.26	2.78	23.17%
Derivatives Contracts	25	26	4.00%
I-REIT Turnover	0.165	0.119	-28.03%
I-REIT Deals	41	21	-48.78%

Global and Regional Markets

Global Markets	W-o-W
S&P 500	-3.27%
Dow Jones Industrial Average (DJI)	-2.47%
FTSE 100 (FTSE)	0.30%
STOXX Europe 600	-0.64%
Shanghai Composite (SSEC)	-1.29%
MSCI Emerging Markets	-2.02%
MSCI World Index	-3.01%

Continental Markets	W-o-W
FTSE ASEA Pan African Index	3.70%
JSE All Share	0.14%
NSE All Share (NGSE)	2.43%
DSEI (Tanzania)	-2.28%
ALSIUG (Uganda)	-0.34%

U.S stocks closed the week low, as loss in Consumer Services, Telecoms and Technology sectors led shares lower. This follows from a low earning reported by big tech companies during the week. This was worsened by expectations that the Federal Reserve will raise interest rates by half a point in an effort to tame inflation.

European stocks closed the week mixed as investors digested ramped up geopolitical tensions as Gazprom pulled out of Polish and Bulgarian markets, a troubled global growth outlook in light of stringent COVID-19 restrictions in China. However, the stocks gained on solid quarterly corporate earnings.

Asia Pacific stocks closed the week low as Investors closely monitored Japanese markets as the Yen continued shedding value against the dollar. 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 3.03% while the ICE Brent Crude decreased by 0.53%. Gold futures prices decreased by 1.93% to settle at $1,896.90.

Week’s Highlights

• IMF staff and the Kenyan authorities reached a staff-level agreement on economic policies to conclude the third reviews of the 38-month Extended Fund Facility/Extended Credit Facility financed program. Kenya would have access to about US$244 million in financing once the review is formally completed by the IMF Executive Board.

• The National Treasury allocated a 203% increase of the cooking gas subsidy scheme for the financial year starting July 2022 to Ksh 471M up from Ksh 155M in the current year. The plan includes distribution of 0.3M 6Kg Cylinders to low income households.

• The major shock to commodity markets especially foodstuff, fertilizers and energy, altering global patterns of trade, production, and consumption brought about by the Russia-Ukraine war could keep prices at historically high levels through the end of 2024, according to the World Bank’s latest Commodity Markets Outlook report.

• Global cooking oil prices set to rise following Indonesia’s decision to ban exports of palm oil on Friday. This is likely to inflame surging global food inflation.