Kenya Set to Take up KES 77Bn Syndicated Loan from Several Banks

Kenya is set to take up KES 77Bn syndicated loan from Standard Chartered Bank, Standard Bank of South Africa, Citi and Rand Merchant Bank. Kenya is targeting to raise KES 153Bn externally and has engaged multilateral and bilateral lenders for loan agreements worth KES 90.23Bn in the October-January period. The syndicated loan, on concessionary terms, will help narrow the budget deficit in the current financial year. On the other hand, domestic borrowing is behind schedule, partly weighed down by central bank low acceptance level of recent Treasury bond issues.

Equities Summary

The Nairobi All Share Index (NASI) gained 0.61% in the week which saw increased activity in the market with more counters releasing their FY16 results. Foreign participation was at KES 2Bn (82.85%) with Safaricom Ltd (NSE:SCOM) eliciting the most interest on the sell-side. Foreign investors were aggressively buying into Kenya Commercial Bank Ltd (NSE: KCB) which pushed the w-o-w price to KES 29.20 (+15.7%). The counter released its FY16 numbers in the week, announcing a dividend of KES 3.00 which is attractive to investors.

Banking Sector

Six of the twelve sectors gained with the Banking sector garnering 3.02% over the previous week’s performance on account of increased activity following banks’ release of their FY16 financials. Kenya Commercial Bank Ltd (NSE: KCB) and National Bank of Kenya Ltd (NSE: NBK) propped the sector rallying 15.7% and 13.64% respectively with National Bank being driven up by speculative trading activity. Stanbic Bank lost 5.80% in the week, indicative of bearish sentiments on the counter in line with the poor FY16 results posted by the bank.

Investment Services Sector

The Insurance sector was the week’s laggard with Home Afrika Ltd (NSE: HAFR) and Olympia Capital Holdings Ltd (NSE: OCH) losing 11.11% and 9.43%, respectively w/w. HAFR touched its 52-week low of KES.0.80 point in Friday’s session. Nairobi Securities Exchange Ltd (NSE:NSE) lost 3.28% to close at KES 11.80 which dragged the Investment Services sector down by 3.28%.

Agricultural Sector

Pyrethrum export earnings dropped from KES 207Mn to KES 120Mn in 2016, representing a 42.03% annual dip. Flower volumes has also trended downwards, dropping by 100 tonnes to 290 tonnes in 2014-2016 period. Projected volumes in 2017 is expected to dip further as farmers shy away from the crop owing to non-payment of supplies by the Pyrethrum Board of Kenya. The global annual demand for pyrethrum currently stands at 8,000 tonnes with Kenya contributing less than 3% – which pales in comparison to the 70% global production contribution during its 2003 zenith level.

Equities

Stanbic Bank Kenya Markit PMI for the month of February was at a record low at 50.1, 20 bps shy from contraction. This was partly driven by reduced output, which marginally declined for the first time in 38 months, on account of lower sales and cash shortages among clients. Backlogs of work grew as new business growth outpaced output. The February reading lends weight that the ongoing drought and private sector credit growth – at a low of 4.30% – has dragged on the private sector segment.