Weekly Market Commentary


Following the postponement of the inaugural session of the People’s Assembly which was to take place on December 12th 2017 and the shelving of the parallel swearing-in of the ‘People’s President’ and his Deputy, the NASA coalition has decided to hold a series of consultative forums. These preparatory meetings will bring together the leadership of the different regions of the country to deliberate on national governance as it affects the regions, and to distil the region’s agenda for the People’s Assembly. The first of these took place in the Coast region on 17th December 2017. 15 of 47 County Assemblies have so far passed the People’s Assembly motion.

CEO of the powerful coalition has stated, “The plan to swear-in Raila in on course. It certainly cannot go beyond 2017, and so we are talking of this happening within the next 10 days or so. We have to end the culture of electoral impunity once and for all and in this year.”

The Rt. Hon. Raila Amolo Odinga’s brilliant political adviser Salim Lone established that the planned ‘swearing-in’ was deferred due to the absence of the said Opposition leader’s running mate, who’s ailing wife is receiving treatment in Germany and thus requires his extended attention. Attorney General Githu Muigai had earlier cautioned the former Prime Minister, calling “this type of process” high treason.

Talks between the Opposition and the ruling administration and MOST ESSENTIALLY an agreement will boost investor confidence, strengthening the Kenya Shilling and the stock market. This is now highly overdue. Leadership of a nation is like marriage. Leaders must always cast aside their egos (despite being right) and learn to compromise for the sake of the better good.


The World Bank has particularised a number of concerns in the 16th edition of the World Bank’s Kenya Economic Update:

  • As of August 2017, private sector credit growth stood at a paltry 1.6% of GDP, its lowest in over a decade, and down from 25% in mid-2014. The slowdown in credit is attributable to a number of factors, such as diminishing confidence in the banking system following the failure of three key banks; a 2015/16 cash crunch; and a segmented interbank market
  • Revenues have underperformed targets by an annual average of 3.7 percentage points of GDP since 2011, despite robust GDP growth. While a rapid rise in public expenditure has significantly contributed to Kenya’s deficit, the underperformance of revenues has also contributed to it.
  • Estimated GDP growth rate of 4.9% for 2017 is Kenya’s weakest in five years

In the medium-term, growth in the Kenyan economy is forecast to recover to 5.5% in 2018 and 5.9% in 2019, though this is contingent upon its implementation of supportive economic reforms and its prudent management of macroeconomic stability. The Group gives a number of recommendations:

  • The need to facilitate and strengthen credit growth to the small and medium enterprises that have been the drivers of Kenya’s economy
  • Improved access to credit requires lowering the cost of credit, removing the interest rate cap, the universal adoption of credit scoring, and accelerating the collateral registry
  • It recommends the rationalization of tax exemptions on corporate income tax; and on VAT.
  • The country will also have to enhance revenue collection in sectors where losses are the greatest. The financial, health, manufacturing, and social work sectors account for 88% of total exemptions.
  • Widening the tax base with measures to improve the tax register could greatly ensure more tax coverage

In the 2016/17 financial year, tax-to-GDP ratio fell to 16.9%, the lowest in a decade. Despite more goods and services being traded, very little of these economic activities have been taxed leading to the usual cycle of huge budget deficits and feasting on debt to artificially tackle revenue emaciation. Between July and September 2017, Kenya Revenue Authority missed its target of Kshs. 89.6b by about 20%, the highest in 15 years!

The Kenya Private Sector Alliance says the sector lost an estimated $7 billion—equivalent to about 10% of Kenya’s GDP—from the effects of the heightened sense of uncertainty the 2017 general elections created. The country’s public debt may soon exceed 60% of GDP; the 2017/18 target is 51.8%.

Of the preliminary actual budget results for the fiscal year 2016/17 only 30% of the Kshs. 2.1 trillion of total expenditure and net lending was spent on development, with the larger chunk going towards recurrent expenditure. However, despite all the doom and gloom, we remain very positive on the Kenyan economy and expect the next five years to be about IMPLEMENTATION OF POLICIES TO BRING ABOUT A SURGE IN BUSINESS ACTIVITY. For e.g. The Government may make it mandatory that all idle land is used for food production or a tax in return for ‘a pass’ by the owner. Agriculture dominates the Kenyan economy, accounting for 70 percent of the workforce.

Market Snapshot

Volume ascended to 143.5 million shares from the preceding week’s 125.5 million (+14%). Turnover logged Kshs. 3.9 billion up from Kshs. 3.4 billion (+15%). A total of 5,243 deals took place indicating an abundance of block trades as the previous week’s figure was 6,268 (-16%).

All the main indices retreated. The NSE 20 slipped to 3707.76 (-1.14%), the broad NASI abrogated gains to close at 172.15 (-1.78%) and NSE 25 dipped to 4306.91 (-1.51%).

Telecommunications Sector

Safaricom Kshs. 26.75 (-3.60%) traded 62,399,000 shares. The corporation registered over 1 million new users to its new 4G+ network in November 2017. The launch of Jamii Telecom’s new Faiba 4G network is barely a fly on Safaricom’s nose. It currently has 300 base station which will go up to 600 next year and 900 in three years. Safaricom, in its 2017 sustainability report revealed the following high points:

  • It has 4,700km of fibre optic footprint
  • Over 4,677 network sites
  • 2G coverage for 95% of the population
  • 3G coverage for 85% of the population
  • Additionally, 1,400 4G sites
  • 4G available to more than 33% of the population in all the 47 counties
  • 130,000+ MPESA agents

Market penetration pricing is clearly not sustainable in the telecommunications business in Kenya. Loss makers are created by this strategy as reflected by Airtel’s woes. Focus should be on quality, innovation and making a difference. That’s simply how Safaricom has outperformed consistently.

Investors are concerned about the decreasing growth in voice and SMS revenue.

In HY 2016:

  • Voice revenue was up only +1.1%
  • SMS revenue was up +8.1%

In FY 2016/17:

  • Voice revenue was up +2.9%
  • SMS revenue actually declined -3.7%

However, in HY 2018:

  • Voice revenue was up 3.6%
  • SMS revenue was up 3.4%

The behemoth telecommunications giant is focusing on making the two components an increasingly smaller and smaller proportion of total income by simply growing total income.

TCM Africa High Dividend Fund, a Euronext listed equity investment fund said the following in its November 2017 report, “In the past month we took some profit in Safaricom in Kenya, as the share gained too much weight in the portfolio while the dividend yield declined.” This means that huge rallies on the share has seen most fund managers reducing their weighting due to overvaluations in the market.

Banking Sector

Equity Bank Kshs. 40.25 (-1.83%) retreated on heavy volume action of 9,989,600 shares while KCB Kshs. 42 (-0.59%) moved 7,559,900 shares.

Co-operative Bank Kshs. 16 (0.00%) was fairly range bound. It was the sector mover as 12,158,600 shares exchanged hands.

Barclays Kshs. 9.80 (0.00%) was also range bound. New buyers were served 490,100 shares. Here are a few highlights from its Q3 2017 results:

  • Total interest income dipped to Kshs. 20.1b (-4.6%)
  • The ratio of total non-interest income to total interest income came in at 32% as compared to 36% in a similar period
  • However total interest expenses decreased 6% and total operating expenses dipped 5%
  • Profit before tax and exceptional items was Kshs. 7.7b in comparison to Kshs. 8.2b reported as at 30th September 2016 (-6%) – this was due to a 14.8% fall in total non-interest income which is related to the slowdown in business experienced during the year
  • EPS recorded Kshs. 0.98 from Kshs. 1.12 in Q3 2016 (-14%), injury added by a lower deferred tax advantage
  • Customer deposits increased to Kshs. 200.4b from Kshs. 180.9b (+10.8%)
  • Total non-performing loans and advances came in at Kshs. 8.9b (+14.5%)
  • Net loans and advances to customers increased marginally to Kshs. 167b (+5%)

HF Group Kshs. 10.75 (-4.44%) experienced the transfer of 241,500 shares.

Commercial and Services

Kenya Airways Kshs. 18.05 (+3.14%) saw 1,509,100 shares fly through the market while Uchumi Kshs. 4.15 (+22.06%) soared with the barter of 400,000 shares taking place. The troubled supermarket chain received Kshs. 700 million from the government to restock its empty shelves during the festive season. It is also banking on sale of a 20-acre plot in Kasarani for Kshs. 3b.

Construction and Allied

ARM Kshs. 11.80 (-5.60%) experienced 1,305,000 shares distributed to new buyers. It set a new 52-week low of Kshs. 10.80 during the week. Bamburi Cement was flat at Kshs. 178 (0.00%) on the movement of 579,000 shares.

Energy and Petroleum

KenolKobil Kshs. 14.05 (-3.10%) experienced heavy flow of 21,778,400 shares as investors swooped in to take advantage of a huge exit that has been depressing the share price for the past few months. Its highly lucrative at these levels.

KPLC Kshs. 9.40 (-1.57%) saw the transmission of 7,494,100 shares. Below Kshs. 9 is a good entry point but for someone who has experienced the return on its 52-week low of Kshs. 6, an even lower price for entry may be desired. The surge in volume however, is an indication of upside confidence even at these levels. The electricity distributor experienced a 40% decline in transformer vandalism in the last financial year from 222 to 133. Chairman Kenneth Marende, also former National Assembly Speaker was shown the door in the recent annual general meeting. It is expected that the new Chairman will steer the monopoly corporation in a better direction.

Kengen Kshs. 8.75 (+2.94%) traded 5,377,200 shares. Be sure to visit their Olkaria Spa this holiday season!


CIC Kshs. 5.80 (+4.50%) saw new buyers lay claim over 1,474,600 shares while Britam Kshs. 14 (-5.72%) experienced a reversal on moderate volume.

Investment and Investment Services

Centum Kshs. 44.25 (+0.57%) moved 636,800 shares and is currently experiencing a lot of foreign interest, which is bullish for the price. NSE Kshs. 20.25 (-5.81%) traded 321,800 shares.


Sources: @CoalitionNASAKe, Tuko.co.ke, Standard Digital, World Bank, Business Daily, National Treasury, export.gov, Potentash, Safaricom, Daily Nation, Morning Star, Barclays