August Review
NSE Market Capitalization retreated 2.55% in August. The pullback was an indicator of increased foreign investors’ sell-offs as the August elections approached. Other than the elections factors, foreign investors’ exits has 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 75bps in the July meeting. The indicative indices recorded a mixed performance with the NSE 20 gaining 2.93% while NASI lost 2.55%.
Earnings Releases – During the month we had HY’22 earnings releases from the banking, insurance, and other sectors. We observed an improvement in the banking sector results driven by increased interest income, improved non-funded income, and reduced provisioning. Players in the Insurance sector also recorded an improved performance largely due to reduced claims and benefits. However, we observed reduced premiums growth and lower investment income. Companies in the manufacturing sector saw an increase in operating costs owing to higher input costs after global commodity prices increased, during the year.
Safaricom (SCOM ) - Safaricom Telecommunications announced the start of a phased commercial launch in Ethiopia with the switch of network and services in Dire Dawa. 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.
KCB Group (KCB) – The lender announced a proposed acquisition of an 85.00% shareholding in the Trust Merchant Bank SA of DR Congo, with an option for a full takeover in two years. Subject to regulatory and shareholders’ approval, the completion of the transaction will see KCB acquire control of TMB and open doors for entry into the much-coveted DRC market.
Inflation rate for the month of August 2022 was 8.50% compared to 8.30% recorded the previous month. Major indices increased y/y; Food and Non-Alcoholic Beverages Index (15.30%); Household maintenance index (10.30%), and Transport index (7.60%).
Kenya shilling continued to depreciate against the USD, losing 1.02% on a m/m basis to close at a historical high of KES 120.01. On a YTD basis, the shilling has depreciated 6.07% against the USD compared to 3.64% in 2021. This is mainly attributable to; the strengthening of the dollar, increased dollar demand from energy importers following high global oil prices, depressed earnings from agriculture and horticulture, and reduced foreign participation in the tourism sector.
What does September hold ?
Presidential Elections Petition – After going to the on August 9th, 2022, there have been nine petitions filed at the supreme court against the declared results. The seven-judge bench is set to issue their decision on Monday 5th September where we expect markets to react to any decision made. An upholding is likely to raise investor confidence as a return to normalcy will be in sight. On the other hand, nullification is likely to lead to a share price decline and investor sell-off as it presents another period of uncertainty.
MPC Meeting – Central Bank’s Monetary Policy Committee is set to meet on 29th September 2022 to review the impact of the July decision and give directions on the CBR. We expect the committee to have the rising inflation in mind and the need to provide rates stability. We shall evaluate the macro climate throughout the month of September and issue comments the on expected decision.
