Weekly Commentary – 21st January 2022

Foreign Exchange Reserves

The CBK’s usable foreign exchange reserves remained adequate at USD 8,715 million (5.33 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 appreciated against the Euro and the Sterling Pound. The depreciation against the dollar is attributable to increased dollar demand from oil and energy importers.

	Week Before	Week After
Dollar	113.37	113.52
Euro	129.49	128.74
Sterling Pound	155.13	154.30

Liquidity

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

	Week Before	Week After
Interbank rate	4.00%	4.68%
Interbank volume (billion)	15.69	18.77
Commercial banks’ excess reserves (billion)	17.10	17.10

Fixed Income

T-Bills

The T-Bills remained over-subscribed, although the subscription rate declined. The decline in subscription is attributable to tightened liquidity in the money markets.

T-Bill	Yield (% Rate)		Subscription Rate
	Week Before	Week After	Week Before	Week After
Overall			156.37%	119.45%
91 day	7.31%	7.33%	110.10%	48.14%
182 day	8.08%	8.07%	137.22%	123.13%
364 day	9.47%	9.51%	194.00%	144.29%

T-Bonds

The bonds market had low demand for the months bond offers. Bonds turnover decreased to Kshs 9.60 billion from Kshs 19.23 billion recorded in the previous week.

In the primary bond market, the Treasury released results for FXD1/2018/10 and FXD1/2021/20 with fixed coupon rates of 12.7% and 13.8%. The Treasury received bids worth Ksh 38.41 billion against a target of Ksh 30 billion, a performance rate of 128.04%. The government rejected expensive bids, and accepted bids worth Ksh 34.90 billion, translating to an acceptance rate of 90.90%.

In the international market, yields on Kenya’s Eurobonds rose marginally by an average of 30.3 basis points. The yield on the 10-year Eurobond for Ghana and Angola also increased.

Equities

NASI and NSE 20 decreased by 0.26% and 0.38% respectively while NSE 25 increased by 0.27%. Market capitalization also decreased by 0.26% to 2.56 trillion. The performance was driven by losses recorded by large-cap stocks. Top losses were recorded in Diamond Trust Bank-Kenya and Safaricom Plc which decreased by 1.7% and 1.1% respectively.

The Banking sector had shares worth Kshs 573M transacted which accounted for 36.94% of the week’s traded value, Manufacturing & Allied sector represented 1.18% and Safaricom with shares worth Kshs 900M transacted, contributed 58.06%.

Top Losers	W-o-W
Transcentury	-10.29%
Flame Tree	-6.11%
Home Afrika	-5.26%
Fahari I-REIT	-4.92%
Kenya Power	-4.73%

Alternative Investments

	Week Before	Week After	% Change
Derivatives Turnover (million)	1.26	1.40	11.22%
Derivatives Contracts	20	13	-35.00%
I-REIT Turnover	0.29	0.19	-32.22%
I-REIT Deals	44	40	-9.09%

Global and Regional Markets

Global Markets	W-o-W
S&P 500	-5.68%
Dow Jones Industrial Average (DJI)	-4.58%
FTSE 100 (FTSE)	-0.65%
STOXX Europe 600	-1.40%
Shanghai Composite (SSEC)	0.04%
MSCI Emerging Markets	-1.05%
MSCI World Index	-4.66%

Continental Markets	W-o-W
FTSE ASEA Pan African Index	-1.57%
JSE All Share	-0.328%
NSE All Share (NGSE)	3.38%
DSEI (Tanzania)	0.68%
ALSIUG (Uganda)	0.53%

U.S stocks closed the week lower following a decline in Consumer Services, Basic Materials and Technology sectors’ stocks. Netflix shares, which plunged after a weak earnings report, capped a brutal week for stocks that saw the S&P 500 and Nasdaq log their biggest weekly percentage drops since the onset of the pandemic in March 2020.

European stocks closed the week mixed, pulled down by heavyweight mining stocks and banks, while tepid retail sales and rate-hike expectations further dampened investor sentiment. Adding to concerns were expectations that the Bank of England will press ahead with its tightening cycle in February as red-hot inflation runs well ahead of target.

Asia Pacific stocks also closed the week mixed, as recent company earnings did not meet expectations, thus dampening investor sentiment. The prospect of both U.S. Federal Reserve interest rate hikes and the possible reduction of its $8.8 trillion balance sheet also weakened investor sentiment.

On the global commodities markets, Crude Oil WTI closed the week high with 1.57% and the ICE Brent Crude increased by 2.13%. Gold futures prices increased marginally by 0.84% to settle at $1,831.80.

Week’s Highlights

• Kenya will retain Citi Bank Group and JP Morgan as it intends to issue its fifth Eurobond, targeting to raise Sh 250 billion, as agreed upon with the International Monetary Fund. The two banks will set the timing for the issue, depending on the market conditions.

• Global oil prices have hit a seven-year high, thus piling more pressure on the government’s fuel subsidy program, which cushions consumers from high fuel prices. The increased oil prices have been attributed to supply chain disruptions following militants’ attacks of fuel trucks in the United Arab Emirates.

• Cyber attacks and supply chain disruptions are the biggest threats to smooth running of businesses this year, according to a report by Allianz. This is a reflection of similar concerns globally that has seen supply hiccups push up prices of products such as cooking oil and motor vehicles. This is coupled up by the current Covid-19 pandemic and political risk, following the oncoming general election later in the year.

• The price of cooking gas has increased by 48% over the last one year to hit an eight-year high. Though industry players attribute the increase to the 16% VAT and global prices as well as the monopoly of the importer and Petroleum Institute of East Africa (PIEA), the price increases have far surpassed the tax increment.

• International arrivals surged 53% in the 12 months to December 2021, on the back of improved marketing efforts and confidence in the country’s efforts to curb the spread of Covid-19. The tourism sector picked in August, following resumption of both domestic and international flights. This further boosted revenue from the sector to 146 billion, compared to 88 billion in 2020.

• The Capital Markets Authority has allowed Sycamore Capital to test its newly developed mobile application, Cashlet App, for a period of six months. The app, which targets retail investors, makes it convenient and affordable for investors to sign up, invest in diversified portfolios and exit unit trust schemes.