October Review
NSE Market Capitalization reversed the last month’s declines to regain 0.30% in October driven by huge gains made by counters such as TPSE and EABL. However, foreign investors’ exits continued as they remained as net sellers despite the peaceful conclusion of the August elections. We continue to believe that foreign investors’ exits at the NSE have been driven by rising yields in developed markets following benchmark rate hikes with the US Fed hiking the benchmark rate by another 75bps in the November meeting.
Inflation rate for the month of October 2022 was 9.60% compared to 9.18% recorded the previous month. Major indices increased y/y; Food and Non-Alcoholic Beverages Index (15.80%); Transport index (11.60%), and Household maintenance index (7.10%).
Kenya shilling continued to depreciate against the USD, losing 0.50% on a m/m basis to close at a historical high of KES 121.33. On a YTD basis, the shilling has depreciated 7.24% against the USD compared to 3.64% in 2021 and 7.70% in 2020. This is mainly attributable to; the strengthening of the dollar, increased dollar demand from energy importers following high global oil prices, and depressed earnings from agriculture and horticulture.
What does November hold ?
Banking Sector Q3’2022 Results - We expect the release of third-quarter banking sector results within the month. As seen in H1’2022 a better economic environment compared to FY’21 contributed to higher profits largely driven by reduced provisioning and a return to lending. Furthermore, we expect the effects of the continued shilling depreciation to be reflected in higher forex trading income as banks take advantage of arbitrage opportunities. We do not foresee any interim dividends.
Safaricom HY’23 Results – Safaricom Plc is set to announce the Half results during the month, where we expect a better y/y performance largely driven by mobile money and data revenue growths. During the month, Safaricom Telecommunications Ethiopia (STE) commenced full commercial operations which included a mobile money license. We view the start of operations as a positive to the share price given the impact the news of the Ethiopian entry had on the share price in 2021.
MPC Meeting November - CBK’s MPC is set to meet in November where we expect another round of benchmark increase driven by the need to anchor the rising inflation. We foresee another 50-75 bps increase to get closer to a double-digit CBR for the first time since April 2019
