Morning Market Brief – 04th April 2018

Macroeconomics

Treasury has ruled out raising its Value Added Tax (VAT) from 16% to 18% to align it with its East African Community (EAC) neighbours. There has been growing concern that different rates at which member countries levy domestic taxes is distorting the EAC common market. Actual receipts from VAT has recorded a CAGR growth of 16.36% from KES 184.92Bn in FY12/13 to KES 339.03Bn in FY16/17. In the past five financial year periods, VAT on domestic goods and services have contributed 51.94% of total VAT. As at Dec 2017, VAT receipts trailed the target of KES 184.64Bn by KES 17.34Bn. The target in the current financial year is KES 383.7Bn and KES 441.2Bn in FY18/19. Treasury has announced a raft of measures to boost revenue including i). scanning activities to detect concealment ii). roll out of Integrated Customs Management System (ICMS) to seal loopholes at the Customs and iii). enhance KRA capacity to support revenue collection.

Fixed Income…

Secondary market turnover retreated to KES 0.76Bn on Tuesday’s session from KES 2.14Bn recorded on Thursday. This week, we expect the market to be quiet as investors map out their 2Q17 strategies which may extend till the next week. The average interbank rate inched up to 6.2448% from 6.0697%. The local unit gained ground against the greenback, closing at 100.90 on Tuesday from 101.07 on Thursday.

Equities Commentary

Equities’ turnover during Tuesday’s session came off by more than half from value recorded in Thursday’s trading.  Activity was still vibrant in Safaricom Plc (NSE: SCOM), KCB Group Ltd (NSE: KCB), Equity Group Holdings Plc (NSE: EQTY) and additionally, East African Breweries Ltd (NSE: EABL) and Co-operative Bank of Kenya Ltd (NSE: COOP). Foreign investors continued dominating market activity, mainly buying into the above-mentioned counters except for KCB where they maintained profit-taking activity continued from Thursday’s session. In today’s trading, we expect foreign investors to maintain dominance and to drive volumes in the main traded counters; Safaricom, KCB, and Equity.

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