Probable Direction of Kenya Equities Market in 2017
The CBK Weekly Report revealed that the interbank rate increased by 80 bps to 8.3%, from 7.5% registered the previous week, a reflection of the skewed liquidity distribution in the money market towards larger banks. The volumes transacted in the interbank market declined significantly to Kshs 12.7 bn from Kshs 23.1 bn transacted the previous week.
The net liquidity injection of Kshs 13.1 bn was driven by government payments of Kshs 19.1 bn, T-bill redemptions of Kshs 12.4 bn and Reverse Repo purchases of Kshs 8.9 bn, offsetting tax remittances by banks of Kshs 11.4 bn, Reverse Repo maturities of Kshs 9.6 bn and T-bill issuances of Kshs 6.3 bn. As highlighted in our Cytonn Weekly #28, the interbank rate is often determined by the liquidity distributions within the banking sector as opposed to the net liquidity position in the interbank market.
According to a weekly report by Cytonn Investment T-bills were undersubscribed for the fourth week running, with overall subscription coming in at 82.5%, compared to 74.9% recorded the previous week. Yields on the 91-day T-bill increased by 10 bps to 8.7%, from 8.6% the previous week, while yields on the 182-day and 364-day T-bills remained unchanged during the week, closing at 10.5% and 11.0%, respectively;
During the week, the Kenyan equities market registered mixed performance, with NASI & NSE 25 both gaining 0.1%, while NSE 20 lost 1.9%. Globally, NASI is the worst performing index year to date, registering a 7.0% decline since the start of the year;
Africa continues to witness increased private equity activity as Nakumatt Holdings Ltd finally lands a strategic investor to inject Kshs 7.7 bn for a 25.0% stake to boost the retailer, while Abraaj expresses interest in acquiring a stake in Barclays Africa Group;
JLL Cities Research Center released a City Momentum Index (CMI) 2017 teaser, which has ranked Nairobi as the world’s 10th most dynamic city, while the Nairobi Urban Transport Improvement Programme announced plans to invest in the Intelligent Traffic Light System (ITS) aimed at easing traffic congestion within the capital;
During the week, T-bills were under-subscribed for the fourth week running with overall subscription coming in at 82.5%, compared to 74.9% recorded the previous week. Liquidity remained tight in the market and we saw the Central Bank of Kenya (CBK), in a bid to ease the liquidity situation in the market, participate in the reverse repo market, injecting Kshs 8.9 bn during the week.
The participation in the Treasury Bills market remained low, but the acceptance rate improved to 97.3% compared to 52.7%, the previous week, an indication that investors pricing was within the government’s acceptable boundaries. Subscription rates on the 91, 182 and 364-day papers came in at 123.3%, 93.1% and 44.6%, from 86.2%, 93.7% and 48.7%, respectively, the previous week. Yields on the 91-day T-bill increased by 10 bps to 8.7% from 8.6% from the previous week while yields on the 182-day and 364-day T-bills remained unchanged during the week, closing at 10.5% and 11.0%, respectively. Going by the subscription rates, investors prefer the 91-day and 182-day papers, an indication of the uncertainty in the interest rates environment.