Weekly Commentary – 9th April 2021

Foreign Exchange Reserves

The CBK’s usable foreign exchange reserves remained adequate at USD 7,425 million (4.56 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 strengthening of the shilling is attributable to subdued dollar demand from importers as well as increased foreign inflows during the week.

	Week Before	Week After
Dollar	109.35	107.97
Euro	128.51	128.35
Sterling Pound	150.67	148.47

Liquidity

Money markets remained relatively liquid supported by government payments which partly offset tax remittances and net redemption of government securities.

Remittance inflows increased by 18.9% to $260.2 million in February compared to $219.0 in February 2020. This is in relation to the 4.25 percent cash reserves requirement (CRR). Open market operations remained active.

	Week Before	Week After
Interbank rate	5.46%	4.67%
Interbank volume (billion)	16.90	7.83
Commercial banks’ excess reserves (billion)	13.8	14.1

Fixed Income

T-Bills

The Treasury Bills remained under-subscribed. The under-subscription in T-Bills is attributable to issuance of an Infrastructure Bond in the market.

T-Bill	Yield (% Rate)		Subscription Rate
	Week Before	Week After	Week Before	Week After
Overall			29.95%	84.78%
91 day	7.09%	7.10%	50.45%	79.03%
182 day	7.91%	7.91%	7.65%	25.59%
364 day	9.31%	9.37%	44.05%	146.27%

T-Bonds

The bonds market had low demand for the months bond offers. Bonds turnover decreased to Sh 3.62 billion from Sh 11.23 billion. The Central Bank of Kenya opened bidding for an infrastructure bond IFB1/2021/18, with a coupon rate of 12.67% and an effective tenor of 18 years. The overall subscription rate stood at 147.63%. The Treasury rejected high bids and accepted Kshs 81.94 billion out of Kshs 88.58 billion worth of bids received, translating to an acceptance rate of 92.51%.

Equities

NASI and NSE 25 declined by 1.30% and 1.16% while NSE 20 increased marginally by 0.23%. The performance was driven by losses recorded by large-cap stocks. Top losses were recorded in DTB-Kenya, Equity Group and KCB Group, which declined by 3.7%, 3.5% and 2.7% respectively.

The Banking sector had shares worth Kshs 318M transacted which accounted for 15.5% of the week’s traded value, Manufacturing & Allied sector represented 13.36% and Safaricom with shares worth Kshs 1.3B transacted, represented 67.53%.

Top Losers	W-o-W
Transcentury	-14.17%
East Africa Portland	-10.00%
Stanlib Fahari I-REIT	-9.20%
Kapchorua Tea	-6.90%
NBV	-4.70%

Alternative Investments

	Week Before	Week After	% Change
Derivatives Turnover (million)	3.43	3.51	2.38%
Derivatives Contracts	89	76	-14.61%
I-REIT Turnover (million)	3.04	0.72	-76.33%
I-REIT Total Deals	57	72	26.32%

Global and Regional Markets

Global Markets	W-o-W
S&P 500	2.71%
Dow Jones Industrial Average (DJI)	1.95%
FTSE 100 (FTSE)	2.65%
STOXX Europe 600	1.16%
Shanghai Composite (SSEC)	-0.97%
MSCI Emerging Markets Index	-0.59%
MSCI World Index	2.40%

Continental Markets	W-o-W
FTSE ASEA Pan African Index	-0.37%
JSE All Share	-0.21%
NSE All Share (NGSE)	-0.17%
DSEI (Tanzania)	0.95%
ALSIUG (Uganda)	-0.03%

European stocks increased marginally during the week. FTSE 100 increased by 2.65% as Britain gradually emerges from a strict winter lockdown as well as performing relatively well on the roll-out of the vaccines.

Major indices in the US stock market ended the week high after the president, Joe Biden unveiled the administration’s preliminary 2022 budget plan which seeks $1.52 trillion in spending. Additionally, the US administration will hold a virtual meeting with the executives of several companies including Apple and Alphebet, to discuss the ongoing global chip shortage which has slowed down production.

On the regional front, DSEI increased marginally as Kenya’s NSE acquired a 4% stake at the Dar es Salaam Stock Exchange, citing strategic reasons.

On the global commodities markets, Crude Oil WTI closed the week low by 3.47% and the ICE Brent Crude declined by 2.94%. Gold futures prices increased marginally by 0.97% to settle at $1,743.30.

Week’s Highlights

• A survey by the Central Bank of Kenya (CBK) indicates that reopening of the economy with the easing of restrictions to curb the spread of Covid-19, increased government spending on projects and resumption of near-normal business by virtually all sectors, are expected to increase economic activity in the next two months.

• Fuel prices may hike if an advisory from the IMF for the country to hike VAT on fuel is applied. This will see the VAT on fuel increase to the standard 16% from the current 8%, so as to meet its fiscal objectives.

• The Group of 20 (G20) has announced the extension of the Debt Service Suspension Initiative (DSSI) by six months until the end of 2021, following the World Bank President’s request to extend debt interest payments moratorium. G20 has also asked the IMF to create a proposal for a new Special Drawing Rights (SDR) allocation of $650 billion to aid global recovery.

• The Chinese State Administration for Market Regulation (SAMR) has fined Alibaba Group Holding Ltd. approximately $2.77 billion for breaching the country’s anti-monopoly laws by not allowing merchants to utilize other e-commerce platforms and hindering free circulation of goods.