Foreign Exchange Reserves
The CBK’s usable foreign exchange reserves remained adequate at USD 8,142 million (4.94 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 weakened against the Dollar but strengthened against the Euro to trade at Kshs 109.11 and Kshs 128.75 from Kshs 108.91 and Kshs 128.85 respectively. The Shilling weakened against the Sterling Pound to trade at Kshs 143.59 an increase of 83 basis points. The weakening in the dollar is attributable to subdued dollar demand from importers.
Liquidity
Money markets remained relatively liquid supported by government payments which offset tax receipts. The inter-bank rate decreased to 3.06% from 3.34% recorded in the previous week. The inter-bank volume increased to Kshs 7.87 billion from Kshs 6.97 billion. Commercial banks’ excess reserves stood at Kshs 9.80 billion which is a decrease from Kshs 10.50 billion. Remittance inflows increased in relation to the 4.25 percent cash reserves requirement (CRR).
Fixed Income
T-Bills
The T-Bills subscription rate increased to 126.55% up from 115.93% the preceding week and remained over-subscribed. The over-subscription in T-Bills is attributable to high liquidity in the money markets. The 91-day paper was oversubscribed at 220.30% up from 56.94%, the subscription rate for the 182-day and 364-day papers stood at 80.26% and 135.35% from 45.51% and 209.95% respectively. The yields on the 91-day, 182-day and 364-day papers papers increased marginally to 6.67%, 7.11% and 8.04% from 6.67%, 7.07% and 7.09% respectively.
T-Bonds
The bonds market had high demand for the month’s bond offers. Bonds turnover increased with bonds turnover closing in at Kshs 2.62 billion from Kshs 1.18 billion registered in the previous week. Overall subscription rate for all the bonds offered was 130.98% from 139.66% in the previous week. The government rejected high bids only accepting Kshs 7.9 billion out of the Kshs 8.0 billion worth of bids received, translating to an acceptance rate of 99.3%.
The auction issued this week was FXD1/2018/25 with a fixed coupon of 13.5% and effective tenor of 23.2 years.
Yields on Kenya’s Euro-bonds remained unchanged with only the 7-year bond issued in 2019 increasing by 0.1% points. According to Reuters, the yield on the 10-year bond remained unchanged, closing the week at 4.7%.
Equities
The Equity Market closed the week with 16 million shares traded with equity turnover of Kshs 372 million against Kshs 15.3 million shares traded with equity turnover of Kshs 374 million in the previous week. Market capitalization increased slightly by 1.85% to Kshs 2.21 billion from 1.18 billion in the previous week.
NASI, NSE 20 and NSE 25 increased by 1.40%, 1.13% and 2.51% respectively. The performance of the NASI was driven by gains recorded by large-cap stocks with the top gains being recorded in East Africa Breweries Ltd (EABL), KCB Group Plc and Equity Group Holdings Plc which gained by 5.5%, 5.3% and 5.1% respectively.
The Banking sector had shares worth Kshs 732m transacted which accounted for 35.27% of the week’s traded value, Manufacturing & Allied sector represented 14.40% and Safaricom with shares worth Kshs 978 million transacted, contributed 47.13%.
Top Gainers and Losers in the Equities Markets
| Top Gainers | W-o-W |
|---|---|
| Sameer | 10.03% |
| Crown Paint | 7.89% |
| Kenya-Re | 7.43% |
| BOC Kenya | 6.19% |
| EA Breweries | 5.47% |
| Top Losers | W-o-W |
|---|---|
| Carbacid | -10.71% |
| EA Portland | -10.00% |
| Total | -8.91% |
| Kenya Power | -7.87% |
| HF Group | -6.50% |
Alternative Investments
The derivatives market over the week recorded 20 contracts having a turnover of Kshs 0.7 million, an increase from 17 contracts having a turnover of Kshs 0.5 million.
I-REIT market over the week recorded a turnover of Kshs 0.20 million with 44 deals which was a decrease from Kshs 0.29 million with 35 deals recorded over the close of last week.
The ETF market registered no activity.
Global and Regional Markets
| Global Markets | W-o-W |
|---|---|
| S&P 500 | 1.61% |
| Dow Jones Industrial Average (DJI) | 3.51% |
| FTSE 100 (FTSE) | 7.13% |
| STOXX Europe 600 | 5.32% |
| Shanghai Composite (SSEC) | -0.06% |
| MSCI Emerging Markets Index | 1.02% |
| MSCI World Index | 2.40% |
| Continental Markets | W-o-W |
|---|---|
| FTSE ASEA Pan African Index | 4.83% |
| JSE All Share | 1.20% |
| NSE All Share (NGSE) | 12.97% |
| DSEI (Tanzania) | 2.07% |
| ALSIUG (Uganda) | 3.53% |
Global stock markets gained over the week. The FTSE 100 & MSCI World Index gained as the market was boosted by the announcement of a Covid-19 vaccine.
US stocks rose early this week following the announcement of the effectiveness of the Covid-19 vaccine. The market also absorbed the news that Democrat Joe Biden was recognized as the president-elect.
The Nigerian Stock Exchange announced a market-wide circuit breaker when the NSE All-Share Index rose beyond the set threshold of 5%, triggering a 30-minute trading halt of all stocks. Market operators were worried the market had diverged from the realities of the socio-economy.
On the global commodities markets, WTI Crude Oil futures closed the week high with 8.62% and the ICE Brent futures increased by 8.69%. Gold futures prices decreased by 3.39% to settle at $1,885.45 from $1,951.70 the previous week.
Oil prices fell towards the end of the week, pressured by fears of a slow recovery in the global economy and fuel demand due to rising Covid-19 infections. However, hopes for a Covid-19 vaccine sustained a second straight weekly gain in market prices.
Week’s Highlights
- Credit Rating Agency Moody’s has maintained Kenya’s loan outlook for 2021 at negative status. Covid-19 negative effects which have weighed down economic activities, government finances, and complicated policy choices have been noted. Pandemic associated expenditures and revenue loss have led to widening fiscal deficits and record-high debt levels.
- CMA has teamed up with the Global Financial Innovation Network (GFIN) members to allow Kenyan innovators to test their financial services and products across borders. CMA says the market-deepening move will see Kenyans test their business models across participating territories.
- Land prices dropped 0.94% from 0.22% in a similar period last year. This is the third quarterly drop in a row on reduced demand, defying the recovery of the economy after a phased reopening of the country from a Covid-19 lock-down earlier this year.
- East African Community (EAC) member states have up to five years to join the UK-Kenya trade agreement due to be signed ahead of the Brexit transitional deadline. The agreement would shield against budgetary cuts that had been imposed on Trade Mark East Africa’s (TMEA) work in Kenya, allowing continued regional trade facilitation by the organization.
- Sub Saharan Africa (SSA) faces a challenge in fiscal consolidation post-2020 due to the Covid-19 pandemic and the economic slowdown in the region. Both of these have been significant blows to government revenue collection in 2020. There have also been other contributing factors such as the fall in oil prices since late 2014, poor tax policies, weak collection infrastructure, and GDP re-basing Citi analysts believe that SSA does not have a debt problem but a government revenue collection problem.
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