Weekly Commentary – 7th May 2021

Foreign Exchange Reserves

The CBK’s usable foreign exchange reserves remained adequate at USD 7,575 million (4.63 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 appreciated against the Dollar, the Euro and the Sterling Pound. The appreciation of the shilling is attributable to subdued dollar demand from general importers.

	Week Before	Week After
Dollar	107.84	106.86
Euro	130.63	127.94
Sterling Pound	150.27	147.67

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	5.23%	4.39%
Interbank volume (billion)	6.38	7.41
Commercial banks’ excess reserves (billion)	13.00	12.30

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 as evidenced by the decrease in interbank rates.

T-Bill	Yield (% Rate)		Subscription Rate
	Week Before	Week After	Week Before	Week After
Overall			124.98%	131.01%
91 day	7.14%	7.15%	42.72%	46.45%
182 day	7.99%	7.99%	37.52%	42.64%
364 day	9.47%	9.42%	245.35%	253.19%

T-Bonds

The bonds market had a high demand for the week’s bond offers. Bonds turnover increased to Kshs 19.50 billion from Kshs 16.77 billion the previous week.

The Central Bank reopened FXD1/2019/15 and issued a new bond FXD1/2021/25 with coupon rates of 12.73% and 13.92% respectively, and effective tenors of 13.0 years and 25.0 years respectively. The bids received amounted to Kshs 42.6 billion against an advertised amount of Kshs 30 billion, translating to a performance rate of 141.95%. The CBK rejected high bids and accepted only Kshs 20.29 billion – an acceptance rate of 47.64%.

In the international market, yields on Kenya’s Eurobonds declined by an average of 2.1 basis points. The yields for Angola’s 10-year Eurobond and that of Ghana also declined marginally.

Equities

NASI and NSE 25 increased by 1.15% and 1.39% respectively, while NSE 20 declined by 0.22%. Market capitalization increased by 1.15% to 2.63 trillion. The performance was driven by gains recorded by large-cap stocks. Top gains were recorded in KCB Group, Equity Group, Co-operative Bank and BAT Kenya which gained by 4.20%, 4.10%, 3.3% and 3.0% respectively.

The Banking sector had shares worth Kshs 766.8M transacted which accounted for 28.71% of the week’s traded value, Manufacturing & Allied sector represented 3.51% and Safaricom with shares worth Kshs 1.7B transacted, represented 65.47%.

Top Losers	W-o-W
Standard Group	-10.00%
TP Serena	-9.20%
Eveready	-7.41%
HF Group	-7.30%
Transcentury	-6.72%

Alternative Investments

	Week Before	Week After	% Change
Derivatives Turnover (million)	10.56	8.29	-21.53%
Derivatives Contracts	270	180	-33.33%
I-REIT Turnover (million)	0.37	0.2	-41.95%
I-REIT Total Deals	39	32	-17.95%

Global and Regional Markets

Global Markets	W-o-W
S&P 500	1.23%
Dow Jones Industrial Average (DJI)	2.65%
FTSE 100 (FTSE)	2.29%
STOXX Europe 600	1.72%
Shanghai Composite (SSEC)	-0.81%
MSCI Emerging Markets Index	-1.20%
MSCI World Index	0.93%

Continental Markets	W-o-W
FTSE ASEA Pan African Index	3.01%
JSE All Share	2.42%
NSE All Share (NGSE)	-1.61%
DSEI (Tanzania)	0.32%
ALSIUG (Uganda)	2.03%

The European stock market closed the week higher, marking strong weekly gains as positive economic data and upbeat earnings underpinned hopes of a swift economic recovery from the pandemic. The indices were also boosted by European technology stocks which were the best performers of the week.

Major indices in the US stock market ended the week high as investors scaled back expectations of policy tapering by the US Federal Reserve after data showed the US labour market had a long road to recovery from the pandemic. The Labour Department report showed the US job growth unexpectedly slowed in April, restrained by a shortage of workers. The report also alleviated some concerns about rising inflation and potentially higher US interest rates.

On the global commodities markets, Crude Oil WTI closed the week high by 2.24% and the ICE Brent Crude also increased by 2.43%. Gold futures prices increased by 3.58% to settle at $1,831.95.

Week’s Highlights

• Revenue receipts by KRA amounted to Kshs 176.66 billion in April 2021 compared to Kshs 144.06 billion in 2020. This is due to increased voluntary compliance, debt recovery initiatives as well as gradual economic recovery as a result of easing the Covid-19 containment measures. This marks the fifth month in a row that KRA has surpassed its monthly targets.

• The Capital Markets Authority has resumed negotiations with Kenya Deposit Insurance Corporation and the Central Bank of Kenya to resolve the impasse on arrangements to reimburse bondholders, through amending of the Deposit Insurance Act, in the event of insolvency and liquidation of banks. Additionally, CMA is considering lowering fees for listing at the NSE, as it seeks to attract more investors.

• A decline in the value of shares at NSE due to volatility in the capital market caused by the pandemic wiped out nearly a quarter of the income earnings of life insurers. According to data by IRA, insurers have been the largest investors in government securities and equities, and this saw ICEA Lion Life Assurance and Britam Group Life lose 46.6% and 48% drop in net profit respectively.

• The number of non-performing loans in the Banking industry is expected to go up in the second quarter of 2021, according to the Credit Officer Survey report by the Central Bank. More than half of the respondents expect the non-performing loans to increase due to the continued adverse effects of the pandemic on the economy. Credit to bank customers, deposits held by banks, liquidity in the banking sector and pre-tax profits increased from the previous quarter while gross non-performing loans ratio deteriorated from 14.1% to 14.6%.

• Kenya’s private sector activity during the month of April dropped to an 11-months low due to extended curfew hours and lockdowns introduced at the end of March. Stanbic Bank Kenya’s PMI declined to 41.5 from 50.6 in March, signifying a sharp deterioration in the business environment due to restricted movement of goods and services, subdued demand as well as high operational costs as a result of increased fuel prices.

• Liaison Group, a financial services firm that is currently operating in five countries including Tanzania, Uganda and Rwanda plans to list on the Nairobi Securities Exchange (NSE) as it seeks to raise funds for expansion in Africa.