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Market Report – 4th December 2020


Faida Research - December 6, 2020 - 0 comments

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Market Commentary:

  • The All Share Index and NSE 20 Index gained by 3.4% and 1.6% w-o-w to close the week at 148.12 and 1,786.42. Market turnover increased by 128.6% to KES 5.3 billion while the volume of shares traded increased by 122.6% to 164.8 million shares. The week’s gain on the indices and activity was predominantly driven by foreign investors (net buyers with a participation rate: 66.8%). Safaricom reached a YTD high of KES 33.50 (+5.0% w-o-w) on foreign investor demand.
  • During the week, the NSE lifted the suspension in trading on Nairobi Business Ventures (NBV) following the conclusion of the company’s restructuring exercise. This saw the share price increase by 505.6% to close the week at KES 4.30.
  •  In the coming week, we expect some profit taking activity on Safaricom and NBV. We also expect activity to remain relatively high.

 

News Highlights:

 Inflation increases to 5.3% in November 2020

  • Kenya’s annual headline inflation rose to 5.3 % in November 2020 from 4.8% in October.
  • The food and non-alcoholic drinks index rose by 1.5%m/m as some of the food items’ price increases outweighed the decrease in others. Some of the key food price increases included beef with bones (+1.0% m/m), wheat flour-white (+0.7 % m/m), tomatoes (+0.7 % m/m), spinach (+0.6 % m/m) and kale (+0.6 % m/m).
  • The housing, water, electricity, gas and other fuels index grew by 0.1 % m/m owing to an increase in the cost of some cooking fuels notably gas (+0.7% m/m), charcoal (+9.5% m/m) and firewood and household utilities. There was however a notable decline in the cost of kerosene (-21.4% m/m) and electricity (-0.2% m/m).
  • The transport index eased by 0.2% m/m due to a decrease in the pump prices of diesel and petrol (-4.3% m/m).

Commentary

  • We expect upward inflationary pressure to persist on account of higher imported inflation (partly due to a depreciating Kenya shilling) and higher demand driven inflation.
  • However, we expect the rate to remain within the Central Bank of Kenya (CBK)’s target range (5.0%+-2.5%) in the near term.
  • As such and given that the economy remains vulnerable, we do not expect the CBK to raise the Central Bank Rate (CBR) in the near term. The CBK will likely employ other tools to mop up excess liquidity in the market.

 

Recommendation:

LONG TERM BUY – KENGEN

HOLD – KENYA RE

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