Weekly Commentary – 24th June 2022

Foreign Exchange Reserves

The CBK’s usable foreign exchange reserves remained adequate at USD 8,028 million (4.77 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 the Euro and the Sterling Pound to exchange at Ksh 117.66, Ksh 123.92 and 143.92 respectively. The observed overall depreciation against the Dollar is attributable to increased Dollar demand from energy and commodity importers.

	YTD Change	W-o-W Change
Dollar	3.99%	0.28%
Euro	-3.26%	1.22%
Sterling Pound	-5.53%	1.22%

Liquidity

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

	Week (previous)	Week (ending)
Interbank rate	5.12%	5.24%
Interbank volume (billion)	10.55	17.10
Commercial banks’ excess reserves (billion)	45.20	36.80

Fixed Income

T-Bills

T-Bills remained under-subscribed during the week with an increase in the overall subscription rate from 80.80% recorded in the previous week to 88.30%. The 91-day T-Bill got the highest subscription rate at 201.4% while the 364-day T-Bill and 182-day T-Bill had a subscription rate of 82.9% and 48.5% respectively. The under-subscription is attributed to reduced investor sentiments in the face of high currency and inflation risks. The acceptance rate decreased by 1.69% to close the week at 95.69%.

T-Bonds

The bonds market had a lower demand for the week’s bond offers. Bonds turnover decreased by 27.08% from 17.78B in the previous week to 12.97B. Total bond deals decreased by 16.30%.

In the primary market, the Central Bank released results for the tap sale of the two fixed coupon treasury bonds; FXD1/2022/03 and FXD1/2022/15. The 3-year and 15 year bond received bids worth Ksh. 3.62B and Ksh. 15.96B respectively translating to an undersubscription rate of 78.4% against the targeted Ksh. 25B.

Eurobonds

In the international market, the yields on the 10-year Eurobonds for Angola and Ghana rose. Yields on Kenya’s Eurobonds generally increased by 11.67 basis points compared to the previous week, 3.13% and 7.40% month to date and year to date respectively. Below is a summary analysis of performance for individual bonds.

Bond	YTD Change	M-o-M Change	W-o-W Change
2014 10-Year Issue	10.73%	4.30%	-0.02%
2018 10-Year Issue	7.82%	3.35%	0.28%
2018 30-Year Issue	4.70%	1.91%	0.03%
2019 7-Year Issue	9.38%	4.37%	0.04%
2019 12-Year Issue	6.33%	2.61%	0.18%
2021 12-Year Issue	5.45%	2.22%	0.19%

Equities

NASI, NSE 20 and NSE 25 decreased by 3.78%, 3.29% and 3.79% compared to last week bringing the year to date performance to -29.86%, -17.81% and -26.32% respectively. The market capitalization decreased by 3.79% from the week to close at 1.826 trillion recording a year to date decline of 29.85%. The performance was driven by loses recorded by large-cap stocks. Top loses were recorded in EABL, ABSA, Safaricom and KCB which declined by 7.43%, 5.56%, 4.94% and 3.17% respectively.

The Banking sector had shares worth Kshs 495M transacted which accounted for 18.69% of the week’s traded value, Manufacturing & Allied sector had shares worth 156M transacted which represented 5.88% and Safaricom, with shares worth Kshs 1.96B transacted represented 74.05% of the week’s traded value.

Top Losers	YTD Change	W-o-W
Nation Media	-15.19%	-16.25%
Scangroup	-26.34%	-11.95%
Limuru Tea	00.00%	-9.86%
Olympia Capital	16.32%	-9.05%
Stanbic	5.17%	-8.73%

Alternative Investments

	Week (previous)	Week (ending)	% Change
Derivatives Turnover (million)	5.75	1.67	-70.96%
Derivatives Contracts	72	38	-47.22%
I-REIT Turnover	0.75	0.37	-50.77%
I-REIT Deals	38	18	-52.63%

Global and Regional Markets

Global Markets	YTD Change	W-o-W
S&P 500	-18.45%	6.45%
Dow Jones Industrial Average (DJI)	-13.90%	5.39%
FTSE 100 (FTSE)	-3.95%	2.74%
STOXX Europe 600	-15.73%	24.0%
Shanghai Composite (SSEC)	-7.78%	0.99%
MSCI Emerging Markets	-18.02%	0.65%
MSCI World Index	-19.19%	5.38%

Continental Markets	YTD Change	W-o-W
FTSE ASEA Pan African Index	-16.38%	-2.74%
JSE All Share	-10.49%	1.54%
NSE All Share (NGSE)	20.17%	-0.14%
DSEI (Tanzania)	-5.12%	-2.15%
ALSIUG (Uganda)	-18.78	-4.22%

U.S stocks closed the week high, as gains in the Basic Materials, Technology and Industrials sectors led shares higher. The stocks rebounded during the week as financial markets have been roiled over worries that rapid rate hikes by the Federal Reserve to rein in 40-year-high inflation could cause a recession. However, investors are gauging the long-term market dynamics after S&P 500 fell by 20% signaling a bear market.

European stocks closed the week higher after receiving a positive handover from the U.S following the completion of the two day testimony by the Federal Reserve on the economy in the congress. However, fears persist that aggressive monetary policy tightening by central banks around the world, aimed at curbing a recent surge in inflation, may instead spark a recession.

Asia Pacific stocks closed the week lower, as investors assessed the monetary policy outlook after U.S. Federal Reserve acknowledged the risk of a recession. Japan and South Korea reported a decrease while Australia, China and Hong Kong were mostly up. However, the Bank of Japan held on to its strategy of pinning 10-year yields near zero at its policy meeting on Friday.

On the global commodities markets, Crude Oil WTI closed the week lower by 3.10% and the ICE Brent Crude decreased by 0.37%. Gold futures prices decreased by 0.75% to settle at $1,828.10.

Week’s Highlights