Market Report – 17th September 2021

Feature of the week:

EPRA Increases Fuel Prices to a 10 year High

• The Energy and Petroleum Regulatory Authority (EPRA), in the September 2021 review, raised the price of petrol, diesel and kerosene in Nairobi by KES 7.58 per litre, KES 7.94 per litre and KES 12.97 per litre to KES 134.72, KES 115.60 and KES 110.82 respectively (effective15^th September to 14^th October).
• The significant price increase was attributed to the removal of a subsidy program effected in April 2021 to cushion users and lower the cost of living. Subsidies worth KES 7.10, KES 9.90 and KES 11.36 per litre have been removed on petrol, diesel and kerosene respectively.
• The prices of diesel and kerosene had previously remained unchanged from April 2021 while the price of petrol had been unchanged since June 2021.
• According to EPRA the average landed cost of imported super petrol and diesel declined by 0.7% and 4.8% month-on-month to $548.36 per cubic meter and $ 514.25 per cubic meter respectively in August 2021. The landed cost of kerosene however increased by 1.0% month-on-month to $ 498.19 per cubic meter.
• Parliament has summoned the Cabinet Secretaries for Petroleum and Energy to appear before the House over the subsidy removal on Tuesday next week.
• The subsidy scheme was being supported through the Petroleum Development Fund which is financed through the petroleum development levy. The levy (which rose to KES 5.40 a litre of fuel in 2020 from KES 0.40) was established to be used to develop the oil industry and stabilize local petroleum prices.

Commentary

• The increase in oil prices is set to raise inflationary pressures and the cost of living at a time when the economy has still not fully recovered from the adverse effects of the COVID-19 pandemic.

Equities Market Summary:

Nairobi Securities Exchange Performance

The All Share Index (NASI) rose by 1.5% w/w while the NSE 20 fell marginally by 0.1% w/w to close the week at 182.75 and 2,061.45 respectively. Market turnover edged up by 24.7% to KES 2.5 billion while number of shares traded grew by 16.8% to 76.3 million shares. Notable price gains this week included; Sanlam (15.9% w/w to KES 11.50), Carbacid (5.0% w/w to KES 11.55), Liberty (4.7% w/w to KES 8.00), Equity (4.4% w/w to KES 53.25), KCB (4.2% w/w to KES 48.55) and HF (3.4% w/w to KES 3.92). Safaricom rose by 1.6% w/w to KES 43.20. In the coming week, we expect price stability.

Recommendations:

KCB – Neutral