Expectations are mounting that the Central Bank of Kenya Monetary Policy Meeting – slated for end January- will maintain the interest rate at 10.0%. The forecasts are informed by a deceleration in GDP growth projections attributed to weaker private sector credit growth. GDP growth was reported on a low gear of 5.7% in 3Q16 against a 6.0% in 3Q15. However, the shilling is expected to be under pressure against a stronger dollar in the near-term attributed to US Federal monetary tightening.
The market turnover picked up slightly yesterday to KES 555Mn with continued interest on the medium-to-long end of the curve. There was not much movement on yields with most investors awaiting the 364 day T bill results for direction signal. The 182 and 364 day T-bill remain range bound both dropping by 1 basis points, despite under-subscriptions of KES 1.94Bn and KES 3.35Bn against an offered amount of KES 6Bn per tenor. It seems the local unit will heavily influence the rates in the coming days as it continues loosing ground against the greenback, consequently forcing the CBK to come in to support. The USDKES currency pair ended the day at 103.60/80. The Central Bank reserves have fallen to 4.56 months of import cover as at end of 2016 from a high of 5.18 months at the beginning of 4Q16 and is expected to fall further in coming days.
Market volume receded slightly in yesterday’s session on account of subdued foreign participation. KenolKobil Ltd (NSE: KENO) occupied top spot of most traded counter by foreigners, followed by KCB Group Ltd (NSE:KCB) and The Cooperative Bank of Kenya (NSE: COOP) which noted a net foreign interest. Britam Holdings Ltd (NSE: BRIT) was the biggest laggard as a supply surge weighed on the counter’s price. We expect continued interest on the Britam Holdings Ltd (NSE: BRIT) counter, Safaricom Ltd (NSE: SCOM) as it charts 4G internet spectrum expansion across Kenya and East African Breweries Ltd (NSE: EABL) on account of attractive price levels.