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Market Report – 12th November 2021


Faida Research - November 15, 2021 - 0 comments

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Features of the week:

Stanbic Bank Kenya’s PMI Indicates Improving Business Conditions in October 2021

  • The headline Purchasing Managers Index (PMI) reported in October rose to 51.4 from 50.4 in September. The improvement was driven by output growth and expansion of new business.
  • According to Stanbic Bank Kenya in October business activity expanded at the fastest pace in the past 5 months, driven by higher demand and output – with the improvement in domestic demand driven by increased client spending particularly in wholesale and retail trade.
  • Growing demand from Europe saw export demand rise at the fastest rate since August last year.
  • Input costs rose driven by:
    • Weak material supply
    • Higher Value Added Tax (VAT)
    • Higher energy prices
  • As a result, output prices grew with businesses passing on higher input costs to buyers.
  • Businesses increased their output as Covid-19 restrictions were eased and demand rose – particularly in service firms.
  • Employment levels grew for the 6th consecutive month with businesses looking to boost capacity. However job creation rates declined as businesses remained uncertain over future activity.
  • Business purchasing activity grew at a faster rate. This was attributed to firms boosting stock levels.

Commentary

  • We expect increased consumer demand following the easing of restrictions (removal of the night curfew).
  • We expect this to further improve business conditions in November, especially for businesses in the service industry such as restaurants and bars.

 

KCB Partners with TATA Africa on Truck Financing

  • KCB has partnered with TATA Africa to offer loans for construction trucks – with KCB financing up to 95.0% of the loan
  • The credit facility has a repayment period of 6 years for customers purchasing trucks in one year
  • According to TATA Africa, the move aims to ensure customers have access to specialized services post-purchase; given the rising demand for vehicles used in construction.
  • Further, the partnership targets individuals, small-medium size companies (SMEs) and large commercial businesses

Commentary:

  • The partnership is timely as the construction sectors has seen increased activity as the government focuses on construction of roads and bridges. We opine that the credit facility will support SMEs which have been adversely affected by the COVID-19 pandemic.

 

Equities Market Summary:

Nairobi Securities Exchange Performance

The All Share Index (NASI) rose by 0.3% and the NSE 20 eased by 1.5% w-o-w to close the week at 171.47 and 1,919.95 respectively. Equity turnover rose by 89.8% to KES 3.5 billion while the volume traded rose by 60.7% to 101.4 million. Most banking counters registered price increases including; HF (8.6% w/w to KES 4.15%), Stanbic (8.0% w/w to KES 94.00), BK (7.5% w/w to KES 28.50) and Equity (5.2% w/w to KES 52.50). Equity’s price rose as the bank released positive results (+77.8% to KES 26.3 billion) for 3Q2021. You can read more on this in our note here: Safaricom remained flat following the release of its half-year 2022 results on Wednesday (+12.1% y/y to KES 37.1 billion). We expect overall market activity to remain skewed towards the banking sector with continued release of 3Q21 results.

 

Recommendations:

KCB – Neutral

Equity – Hold

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