The government is ahead of its domestic borrowing schedule, having borrowed Kshs 316.0 billion for the current fiscal year compared to a target of Kshs 200.9 billion (assuming a pro-rated borrowing throughout the financial year of Kshs 219.0 billion budgeted for the full financial year).
With one month left to the end of the current fiscal year, the government has surpassed its local borrowing target. The additional 97.0 billion above the target will go towards plugging the tax collection deficit by KRA.
The government will look to shift their attention to achieve the foreign borrowing target and start front-loading for the next fiscal year. With interest rates still coming down, but showing signs of bottoming out at the current levels, we advise investors to lock in funds in short to medium term paper for tenors between six months and one year as the rates are attractive on a risk-adjusted basis.
During the week also, the market was on a downward trend with the NASI, NSE 20 and NSE 25 losing 0.6, 0.6, and 0.8, percent respectively, taking their YTD performance to (0.1 percent), (4.3 percent) and (0.1 percent), respectively.
The top movers for the week were EABL and Equity Group accounting for 48.5% of market turnover. KCB group recorded the highest net foreign outflows of USD 1.8 million after recording an anemic growth in its EPS in Q1’2016. Since the peak in February 2015, NASI and NSE 20 are down 18% and 29.7%, respectively.
Equity turnover rose by 32.2% during the week to USD 27.2 million from USD 18.4 million last week. Foreign investors remained net buyers this week, with net inflows increasing to USD 6.0 million from net inflows of USD 0.4 million last week. The foreign participation increased slightly to 69.5% from 64.2% last week.
The market is currently trading at a price to earnings ratio of 13.2x versus a historical average of 13.8x, with a dividend yield of 4.2% versus a historical average of 3.4%. The charts below indicate the historical PE and dividend yields for the market.
This information is according to the economic report by Cytonn Investments.
Article by Juma Fred.