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Market Report – 29th October 2021


Faida Research - November 1, 2021 - 0 comments

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Features of the week:

Kenya Obtains KES 16.7 billion loan from World Bank

  • Kenya has obtained a KES 16.7 billion loan from the World Bank – through its International Development Association arm – to support local communities affected by climate change and drought.
  • The loan facility was approved through the new Financing Locally-Led Climate Action (FLLoCA) program
  • According to the World Bank, the primary beneficiaries of the program will be communities in rural areas, especially those in arid and semi-arid regions, which have been affected by the impacts of climate change such as droughts, floods, outbreaks of climate-related dieses, low farmland productivity and declining livestock.
  • Counties are set to receive annual disbursement based on performance against a specified results-based criterion

 

Commentary

  • According to the Central Bank of Kenya (CBK), the country’s domestic and external debt stood at KES 3,909.81 billion and KES 4,015.30 respectively as at June 2021. The external debt has risen by 14.2% y/y from KES 3,515.81 billion in June 2020. We opine that spending on development could be weighed down by the high debt levels and increased interest repayments.
  • We expect the loan to support communities in areas that have been negatively impacted by drought in the country such as Isiolo, Garissa and Tana River and cushion those who have lost livelihoods as a result.

 

EABL KES 11.0 billion Bond Oversubscribed

  • EABL’s KES 11.0 billion medium-term note registered an oversubscription of 275.0% with investors bidding KES 37.9 billion.
  • The offer opened on 6th October 2021 and closed on 21st October 2021. The 5 year medium term note with an interest rate of 12.25% payable semi-annually will be listed for trading on the NSE from 1st November 2021.
  • According to management, the medium-term note was issued based on the company’s proven track record in the debt capital markets.

Commentary

We opine that the significant oversubscription in the COVID-19 environment signifies increasing investor confidence in corporate bonds as well as the company’s ability to repay the bond

 

Equity Group set to lend $500.0 billion loan

  • Equity Group is set to lend $500.0 billion to Kenyan and South African firms that want to establish manufacturing, construction, health and investment firms, facilitate value addition through processing and packaging and finance export or import business.
  • About KES 100.0 billion of the funds will be sourced from development institutions such as the African Development Bank (AfDB) and the remainder from customer deposits.
  • The move is aimed at expanding the bank’s operations without setting up physical branches
  • According to management, the KES 500.0 billion would go towards facilitating trade by funding Kenyan importers or South African firms that want to export into the regions the Group operates in or firms that want to have partnerships in the region.

Commentary

  • The Group has been keen on geographical expansion and business diversification. We note that in 2020, the Group halted plans to expand geographically into Southern Africa owing to the negative impact of the COVID-19 pandemic on the business environment. We opine that the move to expand to South Africa without setting up physical branches is prudent in light of the COVID-19 environment.

Equities Market Summary:

Nairobi Securities Exchange Performance

 The All Share Index (NASI) slightly eased by 0.3% w-o-w while the NSE 20 Share Index was flat to close the week at 177.96 and 1,961.33 respectively. We attribute the dip in the all-share index to a decrease in Safaricom’s price by 0.3% w/w to KES 42.80. Equity turnover declined by 39.3% to KES 2.0 billion while the volume traded fell by 30.3% to 50.9 million.  Notable price declines in the week included; Eaggads (9.1% w/w to KES 12.00), NMG (4.8% w/w to KES 20.70), NCBA (3.6% w/w to KES 24.10), ILAM (3.7% w/w to KES 6.72), CIC (2.7% w/w to KES 2.56) and Co-op (2.0% w/w to KES 12.50). We expect price stability in the coming week.

 

Recommendation:

KCB -Neutral

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