MONTH’S HIGHLIGHTS

  • Inflation edged up to 5.14% in May from 4.98% in April, reversing a consistent downward trend since January. This rise was primarily attributed to higher food and electricity prices. The food and non-alcoholic beverages index rose by 2.0%, driven by rising food costs. The housing, water, electricity, gas and other fuels index also surged by 1.2%, mainly due to an increase in electricity prices. Notably, despite a drop in fuels prices, the transport index also went up by 0.2% compared to the previous month.
  • The World Bank approved a new $1.2 billion funding under the Kenya Fiscal Sustainability and Resilient Growth Development Policy Operation (DPO), the first in a series of three. This aims to improve the macroeconomic environment following government action to address previous economic challenges, including tight liquidity pressures, depressed investor confidence and limited capital inflows that led to a rapidly depreciating Shilling.
  • The Kenya National Bureau of Statistics (KNBS) released the 2024 Economic Survey Report, outlining the following key economic developments:
    • Real GDP growth increased to 5.6% in 2023 from a 4.9% growth in 2022, primarily attributed to the resilience of the service and agricultural sectors;
    • The current account deficit narrowed significantly in FY’2023, down 13% to Kshs 603.7 billion from Kshs 694.2 billion in 2022, driven by slower import growth compared to exports and a significant rise foreign inflows;
    • The balance of payments (BoP) improved in FY’2023, with the overall deficit decreasing by 46.4% to Kshs 134.8 billion compared to the previous year, supported by a narrower current account deficit and a slight increase in the capital account balance;
    • External debt rose in 2023, reaching Kshs 6.1 trillion by December, a 30.3% increase from the previous year, attributed to a significant surge in multilateral debt and commercial bank loans.
  • According to the African Economic Outlook 2024 by the African Development Bank Group, African economies remain resilient amid multiple shocks. Average real GDP growth is estimated to have slowed from 4.1% in 2022 to 3.1% in 2023. The decline is attributed to several factors: persistently high food and energy prices due to the ongoing effects of Russia’s invasion of Ukraine, weak global demand weighing down export performance, climate change and extreme weather events impacting agricultural productivity and power generation, and pockets of political instability and conflict in some African countries.
  • The South African economy in Q1 2024 fell short of expectations, contracting by 0.1% compared to an upwardly revised 0.3% rise in Q4 2023 and misses market forecasts of a 0.1% increase. This negative growth was driven by declines in manufacturing, mining and construction sectors, alongside significant decreases in household consumption, government spending and fixed investment.
  • The Caixin China General Manufacturing PMI rose to a 23-month high of 51.7 in May 2024 from 51.4 in April, exceeding expectations and marking the seventh consecutive month of expansion. This positive trend was primarily driven by strong domestic demand, reflected in surging output growth and rising backlogs of work. However, a key concern is the softening of new export orders, likely due to a sluggish global economy. Despite ongoing job losses, business sentiment is improving on hopes of a pick-up in both domestic and global demand in the coming months.

ECONOMIC INDICATORS

Foreign Exchange Reserves

During the month, the usable foreign exchange reserves decreased by 3.55% to settle at $6.98 billion (3.60 months of import cover). This falls short of CBK’s statutory requirement to endeavor to maintain at least 4 months of import cover as well as EAC region’s convergence criteria of 4.5 months of import cover.

Currency

The Kenyan Shilling appreciated against the USD, the Sterling Pound and the Euro by 2.29%, 0.82% and 1.19%, exchanging at Kshs 130.23, Kshs 1165.68 and Kshs 140.89 respectively at the end of the month, from Kshs 133.28, Kshs 167.05 and Kshs 142.58 in the previous month. The observed appreciation against the Dollar is attributed to increased foreign inflows.

USD Vs KSHS

STERLING POUND & EURO Vs KSHS

Inflation

The overall year-on-year inflation slightly increased to 5.14% in May from 4.98% in April. This was primarily driven by higher food and electricity prices.

INFLATION EVOLUTION

Liquidity

During the month, liquidity increased as a result of government payments which more than offset tax remittances. The average inter-bank rate decreased from 13.71% to 13.57%. The volume of inter-bank transactions decreased from Kshs 22.35 billion to Kshs 19.98 billion. Commercial banks excess reserves decreased from Kshs 22.60 billion to Kshs 15.70 billion.

INTER-BANK RATE and VOLUME

FIXED INCOME

T-Bills

T-bills recorded an overall subscription rate of 153.26% during the month of May, compared to 129.58% recorded in the previous month. The performance of the 91-day, 182-day and 364-day papers stood at 326.69%, 134.07% and 103.08% respectively. On a monthly basis, yields on the 91-day, 182-day and 364-day papers increased by 0.83%, 0.90% and 1.30% to 15.96%, 16.61% and 16.71% respectively.

T-BILLS

T-Bonds

During the month, T-Bonds registered a total turnover of Kshs 119.53 billion from 2,973 bond deals. This represents a monthly increase of 11.18% and 27.91% respectively. The yields on government securities in the secondary market decreased during the month of May.

In the primary bond market, CBK reissued FXD1/2024/10 bond with a 16.00% coupon rate, seeking to raise Kshs 15.0 billion. Additionally, Central Bank reopened FXD1/2023/02 & FXD1/2024/03 bonds with effective tenors of 1.2 years and 2.6 years, and coupon rates of 16.97% and 18.39% respectively, seeking to raise Kshs

30.0 billion. The period of sale runs from 30/05/2024 to 05/06/2024. CBK also reopened FXD1/2023/05 & FXD1/2023/10 bonds, with effective tenors of 4.1 years and 8.7 years, and coupon rates of 16.84% and 14.15% respectively, seeking to raise Kshs 30.0 billion. The period of sale runs from 30/05/2024 to 12/06/2024.

YIELD CURVE

EQUITIES

During the month, market capitalization gained 6.04% to settle at Kshs 1.77 trillion. Total shares traded increased by 69.12% to 509.65 million shares and equity turnover also increased by 118.72% to close at Kshs 16.04 billion. On a monthly basis, NASI, NSE 10, NSE 20 and NSE 25 settled 6.04%, 1.86%, 3.88% and 5.25% higher. The performance was as a result of gains recorded by large cap stocks such as KCB, Safaricom and Standard Chartered of 18.70%, 12.23% and 11.34% respectively. This was however weighed down by the loss recorded by Stanbic of 12.15%.

NASI and NSE 10

Market Capitalization, NSE 20 and NSE 25

ALTERNATIVE INVESTMENTS

  • The derivatives market, over the month, recorded a turnover of Kshs 12.70 million with 96 contracts, which was a increase from Kshs 9.55 million with 62 contracts recorded in the previous month.
  • I-REIT market, recorded no activity over the month.
  • The ETF market, had no transaction over the month, from Kshs 0.29 million with 1 deals recorded in the previous month.

GLOBAL AND REGIONAL MARKETS

Global MarketsMonthly ChangeYTD Change
S&P 5004.80%11.27%
STOXX Europe 6002.63%8.29%
Shanghai Composite (SSEC)-0.58%4.20%
MSCI Emerging Market Index0.29%2.37%
MSCI World4.23%8.71%
Regional MarketsMonthly ChangeYTD Change
FTSE ASEA Pan African Index4.47%259.49%
JSE All Share0.76%1.61%
NSE All Share (NGSE)1.09%30.67%
DSEI (Tanzania)15.77%17.13%
ALSIUG (Uganda)4.55%24.71%
  • Global markets registered gains during the month. In the US, the S&P 500 and the Dow Jones indices surged by 4.80% and 2.30% respectively, as the core Personal Consumption Expenditure (PCE) inflation for April, the Fed’s preferred inflation gauge, met investor expectations. This fueled optimism of rate cuts later this year, offsetting losses in technology stocks. In Europe, the STOXX Europe 600 and UK’s FTSE 100 indices edged 2.63% and 1.61% higher, after softer US inflation data spurred hopes of interest rate cuts by the Fed. In Asia Pacific, the Shanghai Composite (SSEC) index lost 0.58%, following the unexpected contraction in China’s manufacturing activity despite continued stimulus measures from Beijing.
  • On a regional front, markets had a positive performance during the month. The FTSE ASEA Pan African index, representing the overall African markets gained 4.47% from April. South Africa’s JSE All Share index, Nigeria’s All share index, Tanzania’s DSEI and Uganda’s All Share index all rose by 0.76%, 1.09%, 15.77% and 4.55% respectively.
  • On the global commodities markets, oil futures indices closed with losses, fueled by fresh hopes on a Gaza ceasefire and ongoing demand concerns. This comes ahead of the highly anticipated meeting of top crude producers on 2nd June 2024. Crude Oil WTI futures and ICE Brent Crude Oil settled 6.03% and 7.10% lower to close at $76.99 and $81.62 respectively.

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