Weekly Commentary – 8th September 2023

Top Gainers and Losers in the Equities Markets

• The Central Bank of Kenya (CBK) increased the limits on mobile money transactions and wallet sizes. The daily mobile money wallet size increased from KES 300,000 to KES 500,000 and the transaction limit from KES 150,000 to KES 250,000. The increased transaction cap will apply to all transactions that use the infrastructure and rails for mobile money, including those between PSPs (Payment Service Providers), banks, and other organizations that collaborate with mobile money providers. The respective current tariff for transactions of up to KES 150,000 will apply for transactions of up to KES 250,000. This will make it easier for businesses, individuals, and government agencies to make and receive larger digital payments, which will make mobile money more convenient in Kenya.

• The Nairobi Securities Exchange (NSE) has launched two new market indices: the NSE 10 Share Index (N10) and the NSE Bond Index (NSE-BI). The N10 Index tracks the performance of the top 10 most traded companies on the NSE, while the NSE-BI tracks the performance of the benchmark government bonds listed on the NSE. The N10 Index is based on a market capitalization-float-adjusted methodology. The index is distributed on a daily basis, and its performance is part of the end-of-day reports. The constituent company list of the N10 Index will be reviewed semi-annually. While the NSE-BI is a weekly index that is based on the closing prices of the benchmark government bonds on the NSE, the index is expected to be used as the underlying asset for a fixed-rate futures contract that will be issued on the NSE derivatives market. The contract will be available to the market starting 1st October 2023.

• The Stanbic Bank Kenya’s PMI rose to 50.6 in August 2023, up from 45.5 in the previous month, indicating a recovery in Kenya’s private sector after six months of contraction. Reduced political tension served as the catalyst for the development by boosting demand and activity in the services and industrial sectors. Output also slightly recovered from July’s fastest pace in almost a year. Despite the small increase, new orders were up over the preceding six months. The rate of job creation accelerated as firms tried to increase their workforce to meet higher demand. However, inflationary pressures remained historically high, which weighed on business costs. Looking ahead, the overall level of confidence rose to a five-month high. This is due to expansion plans by businesses, such as opening new branches and widening product and service offerings.

• Sanlam and Allianz have announced the formation of a joint venture, Sanlam Allianz Africa, following regulatory approval. The joint venture will merge the operations of Sanlam and Allianz in 29 African countries, resulting in the largest pan-African non-banking financial services entity on the continent. The recently formed joint venture will act as a focal point for Sanlam and Allianz’s combined operations throughout the nations of Africa where either or both corporations are already present. Through this partnership, both clients and shareholders will get access to a greater range of insurance and financial services. This collaboration intends to take advantage of the strengths, knowledge, and resources of both firms.

• The Euro Area GDP grew by a meager 0.1% in the three months to June 2023, revised down from an initial estimate of 0.3%. This comes after a 0.1% growth in the previous quarter, which was revised up from a flat reading. On the expenditure front, household consumption remained constant, government spending increased by 0.2%, and gross fixed capital formation rose by 0.3%. However, exports decreased by 0.7% and imports increased by 0.1%. Germany, the largest economy in the Eurozone, saw no growth in the second quarter. France grew by 0.5%, Spain grew by 0.4% and Italy contracted by 0.4%. The overall health of the Euro Area’s economy continues to be a source of concern, and there are growing concerns about its capacity to avert a recession, particularly in light of Germany’s dim future prospects.

• China’s trade surplus decreased to $68.36 billion in August 2023, the smallest since May, as exports fell more than imports amid weak demand. Exports declined by 8.8% year-on-year, better than market expectations of a 9.2% drop, while imports fell by 7.3%, in line with market expectations. For the first eight months of the year, China’s trade surplus stood at $553.4 billion, with exports down by 5.6% and imports down by 7.6%. The trade surplus with the United States widened to $33.06 billion in August from $30.3 billion in July. The slowdown in China’s trade is a sign of the challenges facing the world economy.