September Review
NSE Market Capitalization declined a further 6.58% in September driven by foreign investor sell-offs despite the peaceful conclusion of the August elections. Other than the elections factors, foreign investors’ exits have contributed to an NSE market decline fuelled by rising yields in developed markets following benchmark rate hikes with the US Fed hiking the benchmark rate by another 75bps in the September meeting.
The government announced the full withdrawal of petrol subsidy and a partial withdrawal of diesel and kerosene subsidies. Subsequently, the Energy and Petroleum Regulation Authority (EPRA) reviewed upwards the maximum retail prices of super petrol, diesel and kerosene to KES 179.30, KES 165.00 and KES 145.94 per litre, respectively. The increase was reflected in the end-of-the-month inflation print. We expect the declining global oil prices to be reflected in the November or December review given the 30-45 day time lag.
Safaricom (SCOM) - Safaricom Telecommunications announced the start of a phased commercial launch in Ethiopia has now spread to a total of eight cities. The telco looks to reach 25 cities with a target of April 2023. 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.
CBK’s Monetary Policy Committee met on 29th September and elected to hike the CBR by 75bps to 8.25%. The Committee noted the need to control the rising inflationary pressures which are expected to remain elevated in the near term and remain above the upper target of 7.50%.
Presidential Elections Petition –The seven-judge Supreme court bench issued their decision on Monday 5th September where the August 9th election presidential results as declared by the IEBC were upheld. Thereafter the president-elect was sworn in bringing to an end a period of uncertainty. The new government is just taking shape and we expect key policy decisions to influence economic performance.
Inflation rate for the month of August 2022 was 9.20% compared to 8.50% recorded the previous month. Major indices increased y/y; Food and Non-Alcoholic Beverages Index (15.50%); Household maintenance index (10.70%), and Transport index (10.20%).
Kenya shilling continued to depreciate against the USD, losing 0.60% on a m/m basis to close at a historical high of KES 120.73. On a YTD basis, the shilling has depreciated 6.71% against the USD compared to 3.64% in 2021. This is mainly attributable to; the strengthening of the dollar had gained 16.71% by end of Q3’22, increased dollar demand from energy importers following high global oil prices, and depressed earnings from agriculture and horticulture.
What does October hold ?
We expect the release of Q2’2022 GDP figures from the National treasury. We foresee a better y/y economic performance on the back of a better macroeconomic environment amid the electioneering period.
We anticipate that the cost of living will continue to rise based on higher food and fuel prices and the recent implementation of tax adjustments by KRA.
