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Market Report – 3rd December 2021


Faida Research - December 8, 2021 - 0 comments

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Features of the week:

Kenya Shilling eases to All-time Low

  • The Kenya Shilling declined to an all-time low of KES 112.50 against the dollar this week on Thursday driven by increasing demand for the dollar particularly for imports as the economy recovers. The previous all-time low of 112.30 against the dollar was reached earlier in the week.

Commentary

  • According to the Central Bank of Kenya (CBK), Kenya’s total imports edged up by 27.7% y/y to KES 991.8 billion in 1H2021. In the short-term, we expect the depreciation of the shilling to continue as demand for dollar rises driven by an increase in imports following the easing of restrictions in the country and the recovery of the economy.
  • We opine that the depreciation of the shilling against the dollar will negatively impact consumers as imported goods become more expensive.

 

Inflation eases to 5.8% in November 2021

  • Kenya’s annual headline inflation fell to 5.8% in November 2021 from 6.5% in October.
  • The food and non-alcoholic drinks index rose by 0.9%m/m as some of the food items’ price increases outweighed the decrease in others. Some of the key food price increases included sugar (+11.9% m/m), cooking oil (+5.7% m/m), cooking fat (+4.3% m/m) and Irish potatoes (3.3% m/m).
  • The housing, water, electricity, gas and other fuels index grew by 0.5% m/m driven by an increase in the cost of cooking gas LPG (+3.9% m/m) and house rent (+0.5% m/m).
  • Prices of electricity (50 kilowatts) and electricity (200 kilowatts) declined by 0.4% m/m and 0.3% m/m respectively.
  • The transport index eased by 0.2% m/m. This was attributed to a decrease in bus fares of country public service vehicles.

Commentary

  • We note that the Kenya Shilling fell to an all-time low of KES 112.50 against the dollar on Thursday. We expect the depreciation of the shilling to raise the cost of imports such as oil and in turn raise inflationary pressures in the short-term.
  • The Organization of the Petroleum Exporting Countries and allies (OPEC+) announced this week that the group will retain the plan to gradually increase crude oil output on a monthly basis even with the spread of the Omicron COVID variant. This signaled confidence that the effects of the variant will not be felt in the long term.

Equities Market Summary

Nairobi Securities Exchange Performance

The All Share Index (NASI) and the NSE 20 declined by 2.9% and 2.5% w-o-w to close the week at 160.03 and 1,839.46 respectively. Equity turnover fell by 40.2% to KES 3.6 billion while the volume traded declined by 39.9% to 101.9 million. We attribute the dip in the all share index to a decline in Safaricom’s price by 2.5% y/y to KES 46.60. Notable price declines in the week included; Equity (-9.5% w/w to KES 4.32), KCB (-6.2% w/w to KES 41.15), HF (-5.1% w/w to KES 4.10), Coop (-4.5% w/w to KES 11.80) and DTB (-3.1% w/w to KES 55.25). We attribute overall market decline to profit taking activity. We note that the government is yet to effect restrictive measures due to the Omicron COVID-19 variant. We opine that this should ease investor concerns.

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