Yuan Devaluation Adding Pressure on Emerging Markets

The Kenyan Shilling (KES) extended gains against the US Dollar (USD) by 0.23% to 100.88 as the US data released indicated that non-farm productivity was below expectations, while US unit labour costs rose more than expected. The shilling extended further weakening against the Euro (EUR) by 0.57% to 111.53 as creditors reached a new agreement with the Greek government following further rounds of negotiations. Further gains were registered against the South African Rand (ZAR) by 0.80% to settle at 7.93 as emerging markets faced negative sentiments following the devaluation of the Chinese Yuan.

Kenya Targets Sovereign Sukuk

As the week begun to take shape the local market continued its marginal climb against adverse market conditions, closing the trading day with rewarding figures for bullish investors. The Nairobi Stock Exchange rallied, with the NSE-20 climbing 0.80% to 4519.63 and the NSE All Share Index garnered 0.76% to close the trading day at 154.91. Market capitalisation followed suit as it gained 0.77% to close the trading day at KES. 2169Bn and equity turnover increased 96.02% from the previous day trading as it registered KES. 478Mn.

Although 2014 was a landmark year for sovereign sukuks, with non-Islamic countries (such as the UK, Hong Kong and South Africa) participating in the KES. 10.7 trillion total sovereign sukuk outstanding (as of May 2014); eight other countries expressing their intentions emphasised the potential size, depth and liquidity of the fairly adolescent market.

Kenya is amongst these countries aiming to benefit from investors familiarity and comfort, created by dollar-pegged Gulf economies, in order to finance infrastructure projects; as African countries only account for 1% of the issues. Moody’s outlook for Sub-Saharan African sovereign credit further illustrates this point, stating that; their stable outlook is based on positive drivers such as growth-supportive infrastructure spending, ongoing reform efforts and a growing middle class.

Despite Fitch dropping it to BB- and Moody maintaining Kenya’s rating of B1; corporate firms such as Kurwitu ventures already offer such products.

Equity Market Highlights

East African Breweries Ltd (NSE: EABL) climbed one spot to close as the most traded stock, accounting for 23.14% of the total value traded; as the counter continues to maintain positive sentiment after strong financials. Safaricom Ltd. (NSE: SCOM) was second accounting for 20.86% of the days traded value.

Kenya Airways Ltd. (NSE: KQ) climbed to dominate the top gainers list, scaling 9.09% to KES 6.00. British American Tobacco Kenya Ltd (NSE: BAT) registered a similar 7.34% gain to KES 790.00, curving in as the day’s second best gainer.

Eaagads Ltd. (NSE: EGAD) dropped to claim the day’s top loser, shedding 9.16% to KES 29.75. Sasini Ltd. (NSE: SASN) followed a close second as it retreated by 6.83% to KES 15.00.

Foreign Investor Participation

Foreign investor participation was robust during Tuesday’s trading session accounting for 63.63 % of total turnover against 36.37% local participation. Foreign participants were dominant on the accumulative front; resulting in net inflows worth KES 174.27Mn compared to net inflows worth KES 12.82Mn on Monday.

Foreign investors accounted for 63.63% of the NSE turnover as compared to 77.71% on Monday.

Investors engaged in accumulative activities, resulting in net inflows worth KES 174.27Mn relative to net inflows worth KES 12.82Mn on Monday.

East African Breweries Limited (NSE: EABL) was the day’s highest traded stock, recording a turnover of KES 225.64Mn to account for 23.06% of total market activity and 36.24% of foreign activity Safaricom Limited (NSE: SCOM) followed with a turnover of KES 14.61Mn representing 14.68% of total market activity and 23.06% of foreign activity.

British American Tobacco (NSE: BAT) posted the day’s highest inflows worth KES 92.86Mn whilst Athi River Mining (NSE: ARM) posted the day’s highest outflows worth KES 1.17Mn.