Weekly Commentary – 4th June 2021

Foreign Exchange Reserves

The CBK’s usable foreign exchange reserves remained adequate at USD 7,510 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, the Euro and the Sterling Pound. The depreciation of the shilling is attributable to increased dollar demand from importers.

	Week Before	Week After
Dollar	107.54	107.80
Euro	131.20	131.44
Sterling Pound	152.30	152.91

Liquidity

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

	Week Before	Week After
Interbank rate	5.04%	4.81%
Interbank volume (billion)	10.49	14.08
Commercial banks’ excess reserves (billion)	15.5	15.4

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			152.41%	162.47%
91 day	7.14%	7.14%	61.21%	34.34%
182 day	7.87%	7.82%	103.09%	99.94%
364 day	9.16%	8.97%	238.21%	276.26%

T-Bonds

The bonds market had low demand for the week’s bond offers. Bonds turnover declined to Kshs 13.32 billion from Kshs 34.97 billion the previous week.

In the international market, yields on Kenya’s Eurobonds declined by an average of 5.8 basis points. The yields for Angola’s 10-year Eurobond and that of Ghana also decreased marginally.

Equities

NASI and NSE 25 declined by 1.63% and 0.56% respectively, while NSE 20 increased by 2.51%. Market capitalization also declined by 1.63% to 2.65 trillion. The performance was driven by losses recorded by large-cap stocks. Top losses were recorded in Safaricom, Equity Group and KCB Group which declined by 3.23%, 0.35% and 0.35% respectively.

The Banking sector had shares worth Kshs 1.1B transacted which accounted for 49.86% of the week’s traded value, Manufacturing & Allied sector represented 24.52% and Safaricom with shares worth Kshs 547M transacted, represented 23.63%.

Top Losers	W-o-W
BOC Kenya	-9.63%
Uchumi	-7.69%
Sameer	-6.57%
WPP Scangroup	-6.55%
Limuru Tea	-5.56%

Alternative Investments

	Week Before	Week After	% Change
Derivatives Turnover (million)	12.04	6.41	-46.77%
Derivatives Contracts	311	259	-16.72%
I-REIT Turnover (million)	0.30	0.60	98.84%
I-REIT Total Deals	52	37	94.44%

Global and Regional Markets

Global Markets	W-o-W
S&P 500	0.61%
Dow Jones Industrial Average (DJI)	0.14%
FTSE 100 (FTSE)	0.66%
STOXX Europe 600	0.80%
Shanghai Composite (SSEC)	-0.25%
MSCI Emerging Markets Index	1.53%
MSCI World Index	0.61%

Continental Markets	W-o-W
FTSE ASEA Pan African Index	-0.02%
JSE All Share	0.44%
NSE All Share (NGSE)	1.23%
DSEI (Tanzania)	0.31%
ALSIUG (Uganda)	0.17%

European stocks traded higher as weak US payrolls data pointed to lower chances of early policy tightening and optimism over a eurozone economic recovery lifted most sectors. Investors are also keeping an eye on Federal Reserve and European Central Bank policy meetings next week for hints on tapering their large bond purchase programs.

Major indices in the US stock market ended higher after US jobs data was strong, but not as robust as expected, easing investor worries that the Federal Reserve would soon rein in monetary stimulus. The lower payroll numbers will mute inflation concerns among investors since the job market remains depressed.

Asia-pacific stocks closed the week low as the positive US employment data raised concerns about a slowdown of central bank stimulus measures.

On the global commodities markets, Crude Oil WTI closed the week high by 4.98% and the ICE Brent Crude also increased by 3.25%. Gold futures prices declined by 0.61% to settle at $1,892.00.

Week’s Highlights

• BAT Kenya, EABL and Safaricom led five stocks whose increase in investor wealth at the NSE since the start of the year surpassed the remaining 50 companies. The five stocks recorded a combined year to date gain of Sh334 billion, representing 107.7% of the Sh310 billion appreciation of all shares at the NSE. This is exposing the distortion of the bourse’s performance by the blue-chip stocks, thus making it difficult for investors to gauge the performance of the NSE.

• Family Bank has received approval from the Capital Markets Authority(CMA) to raise KSh 8 billion in tranches through a multi-currency Medium Term Note (MTN). This cash will be raised by way of public offer to strengthen its capital base and support lending as pointed out in the 2020-2024 strategy. This issuance comes after the Bank successfully redeemed its five and a half years (5 and ½ year) Medium Term Note worth KSh 2.02 billion recently.

• The number of property developers who have frozen investments in commercial and residential property has been on the rise in the wake of the pandemic. In recent years, commercial and residential property has experienced oversupply and subdued demand, that has led to low occupancy levels, depressed rental yields and consequently revaluation losses. Additionally, introduction of capital charge regulations implies more capital is required to invest in property.

• Global food prices jumped to a ten year high in May, increasing by up to 40% in the last 12 months as reported by Food and Agricultural Organization (FAO). The increase is attributed to increased costs of vegetable oils, sugar and cereals. Despite the increase, FAO projects that the global ratio of food stocks to consumption will decline to 28.1%.

• Nation Media Group issued a share buyback, proposing to buy back upto 10% of its issued and paid-up share capital, to reduce the company’s shares to 186.7 million. This proposal is subject to shareholders approval during the Annual General Meeting to be held later this month.