Weekly Commentary – 11th June 2021

Foreign Exchange Reserves

The CBK’s usable foreign exchange reserves remained adequate at USD 7,506 million (4.59 months of import cover). This meets CBK’s statutory requirement to endeavour 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 appreciated against the Euro and the Sterling Pound. The depreciation of the shilling is attributable to increased dollar demand from importers.

	Week Before	Week After
Dollar	107.80	107.90
Euro	131.44	131.35
Sterling Pound	152.93	152.25

Liquidity

Liquidity in the money markets improved, supported by Government payments which partly offset tax remittances as well as government securities maturities and redemptions worth Kshs 40.8 billion. Open market operations remained active.

	Week Before	Week After
Interbank rate	4.83%	4.31%
Interbank volume (billion)	13.05	11.84
Commercial banks’ excess reserves (billion)	15.40	14.10

Fixed Income

T-Bills

The Treasury Bills remained over-subscribed. The over-subscription in 364-day T-Bills is attributable to investors rushing to lock in the paper’s attractive return of 8.6% given that the rates have been declining over the past few weeks.

T-Bill	Yield (% Rate)		Subscription Rate
	Week Before	Week After	Week Before	Week After
Overall			162.47%	181.76%
91 day	7.14%	7.10%	34.34%	209.70%
182 day	7.82%	7.73%	99.94%	109.33%
364 day	8.97%	8.65%	276.26%	243.01%

T-Bonds

The bonds market had a high demand for the week’s bond offers. Bonds turnover increased to Kshs 15.88 billion from Kshs 13.32 billion the previous week.

In the international market, yields on Kenya’s Eurobonds declined by an average of 9.1 basis points. The yields for Angola’s 10-year Eurobond and that of Ghana also decreased marginally.

Equities

NASI, NSE 20 and NSE 25 increased by 1.45%, 0.16% and 1.44% respectively. Market capitalization also increased by 1.45% to 2.68 trillion. The performance was driven by gains recorded by large-cap stocks. Top gains were recorded in Absa Bank Plc, Equity Group and Safaricom Plc which gained by 3.3%, 2.8% and 1.9% respectively.

The Banking sector had shares worth Kshs 2.2B transacted which accounted for 45.70% of the week’s traded value, Manufacturing & Allied sector represented 11.85% and Safaricom with shares worth Kshs 1.8B transacted, represented 37.44%.

Top Losers	W-o-W
Eaagads	-16.10%
Sanlam Kenya	-11.43%
Express Kenya	-8.89%
Sasini Plc	-7.12%
Umeme Ltd	-6.58%

Alternative Investments

	Week Before	Week After	% Change
Derivatives Turnover (million)	6.41	3.23	-49.64%
Derivatives Contracts	259	126	-51.35%
I-REIT Turnover (million)	0.60	0.14	-76.57%
I-REIT Total Deals	37	41	10.81%

Global and Regional Markets

Global Markets	W-o-W
S&P 500	0.41%
Dow Jones Industrial Average (DJI)	-0.28%
FTSE 100 (FTSE)	0.92%
STOXX Europe 600	1.09%
Shanghai Composite (SSEC)	-0.06%
MSCI Emerging Markets Index	0.03%
MSCI World Index	0.51%

Continental Markets	W-o-W
FTSE ASEA Pan African Index	1.22%
JSE All Share	-0.28%
NSE All Share (NGSE)	1.11%
DSEI (Tanzania)	0.08%
ALSIUG (Uganda)	1.23%

European stocks traded higher after the European Central Bank raised its recovery outlook and promised to keep ample stimulus flowing, which increased investor sentiment. London stocks also rose to a pre-pandemic high as investors shook off the news of surging consumer prices in the US.

Major indices in the US stock market ended higher as investors continued to digest consumer inflation data and its potential impact ahead of the Federal Reserve monetary policy decision. Most gains were recorded in Technology, Consumer services and Consumer goods sectors.

Asia Pacific stocks were mixed Friday morning after the U.S. released higher-than-expected inflation data the day before. The data drove investor bets that price pressures will be temporary and that central banks will keep their stimulus measured unchanged for a while.

On the global commodities markets, Crude Oil WTI closed the week high by 1.85% and the ICE Brent Crude also increased by 1.11%. Gold futures prices declined by 0.66% to settle at $1,879.60.

Week’s Highlights

• During the week, the National Treasury presented a budget totalling 3.64 trillion for the 2021/2022 financial year, an increase of 12.5% from 2.84 billion in the current financial year, citing the impact of Covid-19 and its containment measures. Ministries that got the highest allocations include; Defence, Education, Transport and Health which got Kshs 294.5B, Kshs 202.8B, Kshs 182.5B and Kshs 121.1B respectively. This is despite the lack of GDP numbers for the year 2020.

• Kenya’s private sector activity picked up in May after months of slow growth. The Stanbic Bank Kenya Purchasing Managers Index (PMI), which measures the level of business activity in the private sector, increased to 52.5 in May from 41.5 in April – the highest in four months. This was due to increased demand for products in firms in the Agriculture sector, Services sector, and wholesale and retail space. However, companies in the manufacturing and construction industry recorded subdued demand.

• Equities and bonds turnover at the Nairobi Securities Exchange (NSE) rose sharply in May, driven by increased trading in blue-chip stocks which account for the bulk of activity at the bourse and demand for infrastructure bonds on the fixed income segment. Equity turnover increased by 43.4% to 14.2 billion in May while bonds turnover increased by 58.1% to 106.9 billion in the same period. Additionally, more people are saving out of caution due to the risk of job losses in the Covid-19 period, as opposed to leaving the money to lie in low-interest bank accounts.

• Kenya Airways (KQ) has picked a UK consultancy firm, Steer Group, to guide it on the most feasible long-term strategy options with the lowest cost, in the face of increased financial losses and subdued passenger numbers.

• Economies of Sub-Sahara Africa declined by 2.4% in 2020- the worst contraction in almost 60 years, and was attributed to the adverse effects of the Covid-19 pandemic. Despite the economic disruptions, these economies have rebounded in the first half of the year, due to increased economic activity and higher oil and metal prices, according to the Global Economic prospects Report by the World Bank.