Weekly Commentary – 21st May 2021

Foreign Exchange Reserves

The CBK’s usable foreign exchange reserves remained adequate at USD 7,546 million (4.61 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, the Euro and the Sterling Pound. The depreciation of the shilling is attributable to increased dollar demand from importers.

	Week Before	Week After
Dollar	107.02	108.23
Euro	129.75	132.01
Sterling Pound	151.21	152.91

Liquidity

Liquidity in the money markets was relatively liquid, supported by Government payments which partly offset tax remittances. Open market operations remained active.

	Week Before	Week After
Interbank rate	4.04%	4.85%
Interbank volume (billion)	12.38	7.59
Commercial banks’ excess reserves (billion)	9.60	19.10

Fixed Income

T-Bills

The Treasury Bills remained over-subscribed. The over-subscription in T-Bills is attributable to improved liquidity in the money markets.

T-Bill	Yield (% Rate)		Subscription Rate
	Week Before	Week After	Week Before	Week After
Overall			110.74%	161.25%
91 day	7.16%	7.16%	35.71%	111.56%
182 day	8.00%	7.95%	28.26%	101.07%
364 day	9.37%	9.28%	222.62%	241.30%

T-Bonds

The bonds market had a high demand for the week’s bond offers. Bonds turnover increased to Kshs 21.63 billion from Kshs 20.49 billion previous week.

In the international market, yields on Kenya’s Eurobonds declined by an average of 18.9 basis points. The yields for Angola’s 10-year Eurobond and that of Ghana also decreased marginally.

Equities

NASI remained unchanged while NSE 20 and NSE 25 declined by 0.24% and 0.01% respectively. Market capitalization also remained unchanged at 2.58 trillion. The performance was driven by losses recorded by large-cap stocks. Top losses were recorded in Bamburi and KCB Group which declined by 6.5% and 2.3% respectively.

The Banking sector had shares worth Kshs 393M transacted which accounted for 12.36% of the week’s traded value, Manufacturing & Allied sector represented 4.57% and Safaricom with shares worth Kshs 2.5B transacted, represented 81.49%.

Top Losers	W-o-W
Unga Holdings	-11.95%
HF Group	-9.50%
Liberty Holdings	-7.27%
Bamburi	-6.50%
Home Afrika	-4.76%

Alternative Investments

	Week Before	Week After	% Change
Derivatives Turnover (million)	5.40	9.83	82.07%
Derivatives Contracts	150	271	80.67%
I-REIT Turnover (million)	0.24	0.47	98.84%
I-REIT Total Deals	36	70	94.44%

Global and Regional Markets

Global Markets	W-o-W
S&P 500	-0.43%
Dow Jones Industrial Average (DJI)	-0.51%
FTSE 100 (FTSE)	-0.36%
STOXX Europe 600	0.43%
Shanghai Composite (SSEC)	-0.11%
MSCI Emerging Markets Index	1.72%
MSCI World Index	0.15%

Continental Markets	W-o-W
FTSE ASEA Pan African Index	-0.17%
JSE All Share	-0.60%
NSE All Share (NGSE)	-2.96%
DSEI (Tanzania)	1.70%
ALSIUG (Uganda)	-0.65%

European stocks traded higher as solid economic data boosted optimism over the region’s outlook. The Eurozone also received positive economic news as PMI data for France and Germany remained firmly in expansion territory. The two economies reported a hefty rebound in services in May.

Major indices in the US stock market ended lower, weighed down by technology and consumer discretionary shares, while the dollar edged higher after stronger-than-expected US manufacturing data. Rising inflationary risks have increased investors jitters in the markets, and minutes from the last Federal Reserve meeting suggested some policymakers were ready to talk about reducing stimulus by tapering bond purchases.

Asia – Pacific stock declined as investors became cautious of the runaway inflation as well as Covid-19 outbreaks in some countries that led to more restrictive measures. Additionally, the brightening economic outlook in places like the USA and Europe continues to dictate market moves.

On the global commodities markets, Crude Oil WTI closed the week low by -2.74% and the ICE Brent Crude also decreased by 3.30%. Gold futures prices increased by 2.06% to settle at $1,881.85.

Week’s Highlights

• The Capital Markets Authority has admitted seven firms into a fintech and innovation hub where they will test new products for possible rollout in the local capital markets. The firms include; Pezesha Limited, Innova Limited, Genghis Capital, CDSC, Pyypl Group, Belrium Kenya and Four Front Management. The innovation is in the fields of robo-advisory, blockchain technology, tokenization of real estate, providing access to global stocks,screen-based security lending and borrowing, regtech solutions and data analytics.

• The value of M-Pesa transactions between users in Kenya and those outside the country have grown by 75.8% to Kshs 289.7 billion in the financial year ended March, on the rising popularity of cross-border deals. The number of M-Pesa global customers has since risen by 49.1% to 823.1 million in the same period. This has boosted Safaricom’s revenue to Kshs 2.01 billion from Kshs 1.32 billion.

• Payroll taxes fell by 6.06% in the first quarter of the year to Kshs 98.97 billion, despite the Treasury reinstating income tax cuts, highlighting the impact of Covid-19 on the labour market. Firms increased pay cuts in order to stay afloat as the economy is grappling in the wake of the pandemic.

• The National Assembly has exempted Japanese companies, consultants, and employees undertaking local projects funded through grants from Tokyo from paying tax in respect of income derived from or accrued in Kenya. Firms currently undertaking projects worth Ksh 328 billion will not remit any tax to KRA.

• Kenya has cut tariff for ships docking at the new Lamu Port by up to 50% of the rates charged at the Mombasa facility for one year, to lure more vessels at the second commercial harbour. The Kenya Ports Authority has lowered the storage charges for transshipment vehicles, with the first 30 days attracting no charge at all. KRA has extended the duration of the entry of cargo from 21 days to 30 days and the transit period has been increased from 30 days to 60 days.

• African Export-Import Bank (Afreximbank) has announced it successfully closed a US$1.3 billion dual tenor bond issuance, the Bank’s largest-ever transaction in the international debt capital markets. The transaction is a major milestone for Afreximbank, marking the second time that the Bank has accessed the 144A US market and is the Bank’s largest transaction in the debt capital markets to date. It fulfils a number of key objectives of the Bank’s Liability Management strategy, which include diversification of the liability book by geography, investor type and tenor as well as reducing the cost of funds.