Weekly Commentary – 9th July 2021

Foreign Exchange Reserves

The CBK’s usable foreign exchange reserves remained adequate at USD 9,590 million (5.86 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 remained relatively stable against the Dollar but appreciated against the Euro and the Sterling Pound. This is because the demand matched the supply in the local currency market.

	Week Before	Week After
Dollar	107.95	107.95
Euro	128.12	127.83
Sterling Pound	149.06	148.77

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	4.89%	4.74%
Interbank volume (billion)	9.20	9.33
Commercial banks’ excess reserves (billion)	11.50	13.90

Fixed Income

T-Bills

The Treasury Bills remained over-subscribed. The oversubscription in the 91-day T-Bill is attributable to the higher risk adjusted return offered by the paper following the decrease in the interest rates of other papers.

T-Bill	Yield (% Rate)		Subscription Rate
	Week Before	Week After	Week Before	Week After
Overall			130.64%	146.01%
91 day	6.73%	6.61%	252.02%	282.70%
182 day	7.23%	7.10%	139.50%	194.11%
364 day	7.66%	7.58%	73.22%	43.24%

T-Bonds

The bonds market had low demand for the week’s bond offers. Bonds turnover decreased to Kshs 21.14 billion from Kshs 22.62 billion the previous week.

The Treasury has reopened three previously issued bonds: FXD1/2012/15, FXD1/2018/15 and FXD1/2021/25 with coupon rates of 11.5%, 12.50% and 13.50%, and effective tenors of 6.2 years, 11.9 years and 24.9 years respectively.

In the international market, yields on Kenya’s 10 year Eurobond increased by an average of 6.0 basis points. The yields for Angola’s 10-year Eurobond and that of Ghana also increased marginally.

Equities

NASI, NSE 20 and NSE 25 increased by 2.34% 1.19% and 2.22%. Market capitalization also increased marginally by 1% to 2.73 trillion. The performance was driven by gains recorded by large-cap stocks. Top gains were recorded in KCB Bank, Absa Bank Plc and Equity Group which increased by 7.1%, 6.9% and 4.9% respectively.

The Banking sector had shares worth Kshs 872M transacted which accounted for 32.23% of the week’s traded value, Manufacturing & Allied sectors represented 21.49% and Safaricom with shares worth Kshs 1.0B transacted, represented 38.33%.

Top Losers	W-o-W
Crown Paints	-26.74%
East African Portland	-10.00%
Kapchorua Tea	-9.81%
Kakuzi	-7.96%
Williamson Tea Kenya	-7.72%

Alternative Investments

	Week Before	Week After	% Change
Derivatives Turnover (million)	4.55	4.69	3.21%
Derivatives Contracts	88	54	-38.64%
I-REIT Turnover (million)	0.47	0.79	70.42%
I-REIT Total Deals	31	70	125.81%

Global and Regional Markets

Global Markets	W-o-W
S&P 500	0.40%
Dow Jones Industrial Average (DJI)	0.24%
FTSE 100 (FTSE)	-0.02%
STOXX Europe 600	0.19%
Shanghai Composite (SSEC)	-0.29%
MSCI Emerging Markets Index	-2.75%
MSCI World Index	0.23%

Continental Markets	W-o-W
FTSE ASEA Pan African Index	0.62%
JSE All Share	-0.12%
NSE All Share (NGSE)	-0.59%
DSEI (Tanzania)	1.78%
ALSIUG (Uganda)	4.71%

European stocks traded mixed due to concerns over slowing global economic growth, rising number of cases of the Delta variant of Covid-19 and the Federal Reserve moving towards tightening monetary policy proved too much for the markets to swallow. Stock indices, which were trading around all-time highs, dropped. The British economy grew a less-than-expected 0.8% month on month in May.

US stocks closed the week higher as gains in the Financials, Basic Materials and Oil & Gas sectors led the shares higher. This rally allowed the indexes to notch slight gains for the week, which also saw a sharp rally in U.S. Treasuries as investors worried the U.S. economic recovery might be losing steam as the Delta variant of the Covid-19 spread globally. A big jump in quarterly earnings is expected to mark a peak for U.S. profit growth in the recovery from last year’s pandemic-induced collapse. Investors are looking to U.S. companies’ upcoming quarterly results and forecasts about the recovery in the second half of 2021 as some worry that the recent economic surge is already waning.

On the global commodities markets, Crude Oil WTI closed the week low by 0.80% and the ICE Brent Crude also declined by 0.81%. Gold futures prices increased by 1.53% to settle at $1,810.60.

Week’s Highlights

• The Stanbic Bank Kenya Purchasing Managers Index (PMI) for the month of June dropped to 51.0 in June from 52.5 in May, signalling improved activity, but at a slower rate and was supported by increased output from the manufacturing, construction and agriculture sectors. This was weighed down by the increased cost of goods due to inflation as well as increased staff costs.

• The Derivatives Market at the NSE has grown intensively since its launch in July 2019, with turnover growing from Kshs 20.5 million in 2019 to Kshs 148 million at the end of H1 2021. The H1 2021 performance marks a 668% turnover gain over a similar period in 2020. Year to date, the increase in trading activity has also led to a 385% increase in average daily turnover compared to 2019 and 2020 levels.

• Global Fintech has ranked Nairobi as the city with the largest fintech ecosystem in Africa and 37th globally this year, replacing Lagos as Africa’s top startup centre. The city with the largest fintech ecosystem globally is San Francisco in the US, followed by London, New York, Sao Paulo, Tel Aviv, Los Angeles, Hong Kong and Singapore.

• KRA, for the first time in eight years, has surpassed its tax collections in the recently concluded financial year by Kshs 16.8 billion to reach a record high of Kshs 1.67 trillion compared to Kshs 1.61 Trillion in the previous year. Customs and Border Control and Domestic Tax Departments were the best performers at 103% and 99.8% respectively while the worst performers were PAYE and Domestic VAT which fell by 9.3% and 7.9% respectively in the wake of the pandemic.

• Adaptis Capital, a Kenyan investment firm has opened an office in the US, providing investors with an opportunity to invest in the New York Stock Exchange companies as well as allowing them a hedge against geopolitical and economic risks. Investors would also receive exposure and expand their portfolio beyond the Nairobi Stock Exchange.

• The Co-operative Bank of Kenya has recently launched a pension-backed mortgage facility in partnership with Enwealth Financial Services Limited enabling its customers to own a home through a mix of their pension contributions and a long-term loan. This will mainly target pension scheme members whose maximum allowed pension benefits cannot cover the full asking price of the targeted house.