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Daily Market Report – 18th June 2020


Faida Research - June 18, 2020 - 0 comments

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Market Commentary:

  • The All Share Index remained relatively flat to close the day at 144.92 .However the NSE 20 closed the day at 1,971.9. Equity turnover at the NSE was 23.6% higher, closing at KES 510.88 Million from KES 414.7 Million. The top traders today were Safaricom, Standard Chartered Bank and KCB Group Plc .Foreign investors were net-buyers, accounting for 62.8% of the day’s purchases and 29.94% of the day’s net sales. In terms of company specific foreign activity, foreigners maintained net-buying positions on Safaricom.

 

News Highlights:

 KCB Partners with Laikipia County Government to Provide Loans

 KCB Group has entered into a partnership with the Laikipia County Government to provide credit worth KES 2.0 bn to SMEs and cooperative societies.
 The credit program is targeting around 5,000 SMEs and 180 cooperative societies in the county in order to simulate business growth and catalyze economic recovery.
 The partnership, which is an interest-sharing and guarantee model, will see SMEs and cooperative societies access credit at an interest rate of 7.5% and 6.0% respectively — significantly lower than prevailing lending rates (the average lending rate was 11.9% as at April 2020).
 The lower interest rates will be achieved through grants offered by the Laikipia County Government which are expected to reduce interest rates by between 5.0% and 6.5%.

Commentary
 We opine that this is a win-win situation; KCB will be able to advance its loan book at market interest rates (interest costs are shared between the County and client) while SMEs and cooperative societies will be able to access affordable credit.
 Owing to the economic challenges brought on by the COVID-19 pandemic, we expect to see similar models (risk-sharing/interest subsidizing models) being adopted by other banks as they are beneficial in growing loan books as well as helping reduce default rates due to the low interests offered.

 

Recommendations:

Long Term Buy- KCB, Equity, Absa, Stanbic, NCBA

Hold- Safaricom

Sell- Stanchart, Bamburi, HF

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