Nairobi Securities Exchange (NSE) Ranked Worst-Performing African Bourse in Dollar Returns
9 October 2023
Nairobi Securities Exchange (NSE) Ranked Worst-Performing African Bourse in Dollar Returns
The Nairobi Securities Exchange (NSE) has earned the dubious distinction of being the worst-performing African bourse in terms of dollar returns for the first nine months of the year.
As per the Morgan Stanley Capital International (MSCI) Index, this concerning ranking underscores the profound impact of foreign exits and global economic shocks on Kenya's financial landscape. A recent Bloomberg analysis further accentuates The NSE's struggle, which similarly positioned it among the world's worst-performing stock markets, following a sharp decline in the NSE All Share Index.
The MSCI Index, renowned as a vital source of investment information for foreign investors, closely monitors three Kenyan blue-chip stocks: Safaricom, Equity Group, and EABL.
These companies, often favored by foreign investors, collectively contributed to the NSE's disappointing performance.
The Kenya Index, represented by these giants, plummeted by a staggering 41.9 percent, settling at 627.4 points.
Notably, this places the Zimbabwe Stock Exchange as the second worst performer, with a negative return of 34 percent.
A combination of factors, including the depreciation of the Kenyan shilling against the dollar by 16.9 percent since the year's inception, as reported by the official Central Bank of Kenya (CBK) rate, has contributed to the decline in the index's performance.
ACQUISITIONS
Controversy Surrounds Sale of Telkom Kenya as New Buyer's Online Presence Raises Questions
The sale of a 60 percent stake in Telkom Kenya has taken a tumultuous turn, with fresh revelations casting doubt on the transparency of the transaction.
Recent reports have exposed that the Dubai-based company set to acquire the majority stake had no online presence until just last month, raising eyebrows among industry experts and government officials. The ownership details of this Emirati firm remain shrouded in secrecy, and the bidding process that led to their entry into the African market remains undisclosed.
The controversy deepened as the government failed to provide clarity on the amount to be refunded by PE fund Helios Partners, which held the Telkom Kenya stake through its Mauritius-based subsidiary, Jamhuri Holdings Ltd. The Infrastructure Corporation of Africa (ICA) emerged as the preferred bidder for the Telkom Kenya stake, according to a Treasury press release. This announcement followed the government's surprising decision to rescind its 2022 plan to purchase the stake from Helios for a total consideration of Sh6.1 billion.
CAPITAL MARKETS
1. Treasury Leans on Short-Term Bonds to Raise Sh35 Billion
In a strategic move to meet its financing needs, the Kenyan Treasury has once again turned to short-term bonds, aiming to secure Sh35 billion from the domestic credit market this month. This decision follows the recent reopening of two- and five-year fixed coupon bonds by the Central Bank of Kenya (CBK).
These bonds have tenors of 1.8 and 4.8 years, and investors can participate in this offering until next Wednesday.
The two bonds carry coupon rates of 16.9723 and 16.844 percent, respectively.
This shift towards short-term bonds reflects the Treasury's efforts to align its debt issuances with investor preferences, which have increasingly favored shorter maturities amid concerns about rising interest rates and associated duration risks.
2. Auto Services Firm AA Kenya Offers 11.44 Million Shares to Raise Ksh 229.73 Million
AA Kenya announced plans to raise Ksh 229.73 million in fresh capital through a restricted share offering to its members and employees. The company will allocate a total of 11,444,880 shares in this transaction, aiming to strengthen its financial position and support its strategic growth initiatives.
Under this offering, AA Kenya will make 7,762,881 shares available to its members at an attractive offer price of Ksh 25.80 per share. Additionally, the company will allocate 3,681,999 shares to its dedicated employees at a par value of Ksh 8 per share. This move not only allows AA Kenya's loyal members and workforce to become stakeholders in the company but also positions the firm for expansion in Kenya's competitive auto services market.
The funds raised through this share offering will be instrumental in advancing AA Kenya's strategic goals of diversification and expansion. Francis Theuri, Chief Executive Officer of AA Kenya, stated,
"One of the pillars of our strategy is to scale up the business through diversification and expansion, benchmarking AA Kenya to other AA organizations globally, and aligning to Federation Internationale de l'Automobile (FIA) standards."
IMPORTS
Kenyan Imports Drop by Nearly 14 Percent Amid Weakening Shilling
The Central Bank of Kenya (CBK) released trade data on Wednesday, revealing a significant 13.8 percent drop in Kenya's imports during the first eight months of the year. Imports fell from $13.28 billion (Sh1.97 trillion) in the corresponding period of 2022 to $11.45 billion (Sh1.7 trillion) this year. This substantial decline highlights the impact of the weakening Kenyan shilling on the country's purchasing power, as it has fallen by 17 percent against the US dollar. The majority of imports are funded using greenbacks purchased in the local market, making them more expensive, and this has also contributed to the high inflation rates experienced this year.
The CBK data revealed that all broad product categories recorded lower imports, with the exception of food and live animals, which saw a notable increase of 28.3 percent, reaching $1.71 billion (Sh254 billion). Conversely, imports of manufactured goods experienced the largest decline, plummeting by 27.3 percent to $1.81 billion (Sh269 billion) compared to $2.49 billion (Sh370 billion) in the previous year.
These statistics indicate that Kenyan businesses and consumers are feeling the pinch of reduced imports.
High Court Freezes Sh63 Million Linked to Payment Solution Firm Amidst Allegations of Criminal Proceeds
The High Court froe over Sh63 million held in two bank accounts belonging to Virtual Financials International Ltd, a payment solution firm. The freeze comes in response to claims by the Assets Recovery Agency (ARA) that the funds in these accounts are connected to proceeds of criminal activities. Justice Nixon Sifuna, presiding over the case, granted the ARA's application to preserve the funds while the agency pursued legal proceedings to seek forfeiture of the money to the government.
The Assets Recovery Agency presented compelling evidence to the court, alleging that the funds in question were derived from illicit activities. They argued that swift action was necessary to prevent the owners of Virtual Financials International Ltd from withdrawing or transferring the money before the investigation and legal proceedings were concluded. Justice Sifuna approved the preservation order, explicitly prohibiting the respondent and its agents from conducting any transactions, withdrawals, transfers, or other dealings involving the funds in the two bank accounts. These accounts, located at Equity Bank, currently hold $16,661 and Sh60.7 million.
WHAT YOU MUST HAVE MISSED
Tea production in Kenya experienced a significant decline for the second consecutive month in July
According to the latest data from the Tea Board of Kenya (TBK). The output of tea fell by 3.43 million kilograms, marking a 7.1 percent decrease compared to June. This downturn follows a peak production of 57.88 million kilograms in May, and the July harvest is now the lowest since March, when 30.48 million kilograms of tea were harvested. However, despite this decline, the output for July still exceeded last year's figures by 10.69 million kilograms, a testament to the improved weather conditions.
This decrease in tea production raises concerns about the industry's overall performance and its ability to maintain consistent output levels. The Tea Board of Kenya will continue to monitor production closely and work to support tea farmers as they navigate changing weather patterns and market dynamics.
Government to Save Sh130.2 Billion Through Recurrent Spending Cuts
In a bid to bolster fiscal consolidation efforts, the government is set to realize substantial savings of approximately Sh130.2 billion through planned reductions in recurrent spending by various Ministries, Departments, and Agencies (MDAs). This landmark decision was greenlit by the Cabinet on Tuesday, underscoring the government's commitment to sound fiscal management.
The approved measures dictate a uniform 10 percent reduction in the recurrent budgets of each Ministry and State Department, marking a significant shift in the trajectory of recurrent expenditure.
Proposed Bill Aims to Curb Forex Hoarding with Heavy Fines
In a move aimed at curbing the hoarding of foreign currency as the Kenyan shilling continues to weaken, a draft Bill sponsored by Rongo MP Paul Abuor has been introduced, which could impose fines of up to Sh10 million on firms caught stockpiling dollars beyond what is deemed 'reasonable' needs. Forex hoarding is defined as the accumulation of foreign currency for speculative purposes, and this proposed legislation seeks to criminalize such practices.