Foreign Exchange Reserves Reduce by KES 38.6Bn Since Beginning of November

Macro Economic

Kenya’s foreign exchange reserves have reduced by USD 378Mn (KES 38.6Bn) since the beginning of November

This drop has been attributed to Central Bank of Kenya selling dollars to support the local currency. Data by the main bank shows reserves stood at USD 7.683Bn (KES 783.7Bn) early November and has since dropped to USD 7.305Bn (KES 745.1Bn). The current foreign exchange reserve is equivalent to 4.80 months of import cover.

Central Bank of Kenya Monetary Policy Committee maintained the Central Bank Rate at 10.00% citing mild inflationary pressures with monthly inflation reported within the target range.

The bank also singled out the prevailing uncertainties, both from the domestic and international fronts, as also contributing factor of the rate retention.

Fixed Income

Trading activity declined to KES 372.88Mn from KES 664.10Bn on Friday, as investors adopted a stand -off approach awaiting the MPC results for the meeting held yesterday. The MPC voted to retain the CBR at 10% which ultimately means that the maximum lending rate and minimum deposit rate remains at 14.00% and 7.00% (respectively). Market liquidity remained skewed prompting Central Bank of Kenya to come into the market for reverse re-po worth KES 15Bn.

Corporate News

Standard Chartered Bank (NSE: SCBK) announced its 3Q16 results for the period ended 30th September 2016 recording a net profit of KES 7.73Bn compared to KES 6.23Bn posted a year earlier. This was mainly attributed to a 14.8% increase in operating income to KES 21.58Bn. Interest income increased 18.4% y-o-y to KES 19.69Bn while interest expenses increased 49.9% y-o-y to KES 4.74Bn.

Interest earned from the government papers grew by 55% to KES 7.52Bn while income from loans and advances jumped 4.1% to KES 11.48Bn. Net interest income was up 11.0% y-o-y to KES 14.96Bn while non-funded income grew by 24.5% to close at KES 6.62Bn. On the other hand, operating expenses grew by 6.5% y-o-y to KES 10.47Bn.

Loan and advances contracted by 4.5% y-o-y to KES 120.76Bn while customer deposits grew 19.8% y-o-y to KES 199.63Bn. The share price closed at KES 187.00 during Monday’s trading session.

Trading Expectation

Market volumes increased during Monday’s trading session with the highest moving counter being East Africa Breweries Ltd(NSE: EABL). There was a notable net foreign buying interest on theEABL counter while KCB Group Ltd (NSE: KCB) attracted local buying interest.

Safaricom Ltd (NSE: SCOM) came back as one of the most traded counters with foreign buying interest whereas Centum Investments (NSE: ICDC) generated local interest.

We anticipate continued interest on the EABL counter on today’s trading session.

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