Market Commentary:
The All-Share Index eased by 0.7% w-o-w to close the week at 147.12We attribute this to profit taking activities on Safaricom whose price fell by 1.6% w/w to KES 32.95. However, the NSE 20 Index gained by 0.4% w-o-w to close the week at 1,794.06. Market turnover decreased by 49.6% to KES 2.7 billion while the volume of shares traded declined by 38.1% to 102.0 million shares. Foreign investors dominated trading (participation rate of 71.9%) and emerged net -sellers during week. We expect price stability in the coming week.
News Highlights:
US FDA Advisory Board Recommends Approval of the Pfizer/BioNTech Vaccine
The US Food and Drug Administration (FDA) advisory board has recommended for approval the Pfizer-BioNTech for Emergency Use Authorization (EUA). The FDA, in making the recommendation, noted that although there were side effects, there were no specific safety concerns identified that would preclude issuance of a EUA. Some of the side effects that were noted included chills, headaches and fatigue.
The US could become the fourth country after UK, Canada and Saudi Arabia to approve the vaccine for mass roll-out, with the UK having already rolled-out the vaccine. If granted EUA, the US could start a mass roll out of the vaccine within days. The immunization is administered in 2 doses, three weeks apart.
The Pfizer-BioNTech and Moderna COVID-19 vaccines are one of 4 US backed vaccines in phase III trials. Moderna has also submitted its EUA application.
Both vaccines are based on Messenger RNA vaccines (mRNA) meaning they have genetic code that contains instructions for the body. These instructions tell the cells to make a viral spike protein similar to the one on the COVID-19 virus. The spike protein then triggers an immune response from the body. The benefit of mRNA technology is that it is fast to manufacture, as opposed to the traditional vaccine technology which relies on a weakened virus to trigger the immune response.
Although, they use similar technology, the Pfizer vaccine requires specialized storage facilities (to maintain extremely low temperate of -70.0 degree Celsius) for distribution compared to the Moderna vaccine (only requires -20.0 degrees Celsius). The Pfizer vaccine would cost $20 per dose while the Moderna vaccine would cost $32-37 with a possible discount if bought in bulk.
UPDATE: FDA has approved the Pfizer/BioNTech vaccine for emergency use.
Commentary:
The progress made on the vaccines is definitely good news for the global economy. We opine that a mass roll-out of the vaccines may result in faster economic recovery. There still remains concerns on access (availability and the costs of a mass roll-out) especially for developing nations.
Results for Re-opened FXD1/2012/15 and FXD2/2019/15 Treasury Bonds
The Central Bank of Kenya (CBK), acting in its capacity as fiscal agent for the Republic of Kenya, invited bids for re-opened FXD1/2012/15 and FXD2/2019/15 with the intention of raising KES 40.0 billion for budgetary support.
The auction results for the bonds are shown in the table below:
| FXD1/2012/15 | FXD2/2019/15 | Total | |
| Amount Offered (KES) | 40.0 billion | ||
| Bids Received (KES) | 9.3 billion | 15.1 billion | 24.3 billion |
| Performance rate | 23.2% | 37.7% | 60.9% |
| Amount Accepted (KES) | 8.6 billion | 9.7 billion | 18.3 billion |
| Weighted Average Rate of Accepted Bids | 11.5% | 12.8% | |
| Coupon rate | 11.0% | 12.7% | |
Source: CBK
We note that the results are in line with our expectations (11.6% for the FXD1/2012/15 and 12.6% for the FXD2/2019/15). The issue was undersubscribed (as expected) indicating lower liquidity in the market and poor appetite for longer dated papers from some of the participants, in particular commercial banks. As mentioned, this is due to higher duration risk with longer term papers especially with expectations of higher interest rates).
We opine that the government might issue a tap sale in the course of the month owing to the undersubscription.
Corporate Finance:
CredPal raises $1.5 million in Funding Round
Nigerian fintech startup CredPal has raised $1.5 million in its recent funding round from Y Combinator (a US based seed-stage accelerator), GreenHouse Capital (a Lagos based fintech investment holding company) Tangerine Life (a digital insurance company) and other Venture Capital firms. Credit card use is not popular in Nigeria and the startup is looking to increase adoption and usability of credit cards. According to the company’s management, the goal is to make credit cards mainstream across Africa similar to other advanced economies. Further, the $1.5 million funding coupled with the growing market demand for consumer credit is expected to boost the company’s growth. We note that while cash is still king in the African continent, the convenience of non-cash payments and the increasing availability of reliable non-cash technology is growing demand for credit cards. We opine therefore that there is room to grow penetration.
Recommendation:
LONG TERM BUY – KENGEN
HOLD – KENYA RE