Morning Brief 25th June 2018

Macroeconomics…                                                                                                                              

Energy Regulatory Commission revised downwards the fuel pump price for Super Petrol and Kerosene by KES 0.63 and KES 0.73 per litre, respectively, while left unchanged the price for fuel. The fuel pump price decline have resulted by the retreat in average landed cost of imported Super Petrol (1.05% m/m), Diesel (0.59% m/m) and Kerosene (0.69% m/m). The Free on Board (FOB) price of Murban crude oil eased in March to USD 66.10 per barrel, down from USD 69.75 per barrel in January. In April, the global oil price has ranged between USD 66.93 -72.18 per barrel which will propel upwards the cost of fuel pump products in the next monthly review. In a plan to curb fuel adulteration and rev up clean energy sources for cooking and lighting, the government intends to increase the tax for kerosene to match that of diesel. Currently, taxes and levies applied on Diesel and Kerosene are KES 29.57 and KES 8.40 per litre, respectively. The steep price difference is mainly attributed by the fact that Kerosene is exempted from Road Maintenance Levy of KES 18.00 per litre. The proposed kerosene tax raise will impact negatively on the low-income households which rely on kerosene for their cooking needs.  

 Fixed Income…                                                                                                                                  

Despite the market seeming quiet in the past week, turnover rose to KES 11Bn over the previous week’s KES 7.3Bn. Interest remains centered around 1-3 year tenors and the longer dated infrastructure bonds. This week, we expect interest in the short end to remain strong with the market quite liquid. Demand on longer dated IFBs at levels of 11.9015% and above is expected to remain strong as well. The CBK was in the reverse repo market on Friday offering KES 10Bn. Equally, the shilling remained strong trading at an average of 100.81.
       Equities Commentary…                                                                                                                   

Trading Expectation:

Turnover came off 5.18% to KES 0.75Bn during Friday’s session compared to KES 0.76Bn recorded on Thursday. Most of the activity was in the banking sector counters, Equity, Barclays and KCB and additionally, Safaricom and Centum Plc. Equity held as the day’s top mover with 51.6% of total market turnover with an overall selling sentiment in the market, pushing the price 0.89% lower.  Contrary to our expectation, foreign investors dominated the market, accounting for 75.2% of total NSE trades. In today’s session, we might see more interest in Equity Group Holdings Plc (NSE: EQTY), as the share price comes down from its highs reached in the previous week. We saw renewed interest at KES 55.50 levels in the previous session with increased foreign investor buying interest. In KCB, we expect to see the price come off further to KES 52 levels which might act as support for the counter as local investors continue to exit the counter. On Safaricom, we might see increased local investor demand at levels of KES 31 and a probable support at KES 30  as foreign investors continue to exit the counter.

 

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