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Equities: Foreigners Run The Show…Despite the increased pressure on the NSE, the NSE 20 share index managed to close 6 points higher at 3975.79. The NASI improved to 87.54 while the FTSE 15 and 25 indices closed 0.04% and 0.23% higher respectively. Foreign investors ran the trading session in the week accounting for a mammoth 73% of total equity turnover but remaining long with a value of Kes.215Mn. Equity turnover rose 29% to Kes.3Bn buoyed by the increased participation touching daily value of Kes.1Bn for the second time in the year.
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Bloomberg: GNCP <GO> www.genghis-capital.com
Weekly Market Monitor - No. 01
Genghis Capital Research: Equities, Fixed Income, Currency, Commodities
Themes: Momentum Building, Yield Upturn, Transmission of Global Uncertainty & Risks...
Equities: Foreigners Run The Show… 3
Fixed Income: Uptick in Yields to Sustain … 8
Currency: Tea Export Inflows Cushion the KES… 10
Commodities: Brent Oil Posts 2% Weekly Loss… 11
Weekly Market Monitor - No. 40/2012
Genghis Capital Research: Equities, Fixed Income, Currency, Commodities
Weekly Market Monitor - No. 40
2
Executive Summary
Themes: Momentum Building, Yield Upturn, Transmission of Global Uncertainty & Risks...
Equities: Foreigners Run The Show…Despite the increased pressure on the NSE, the NSE 20 share index
managed to close 6 points higher at 3975.79. The NASI improved to 87.54 while the FTSE 15 and 25 indices closed
0.04% and 0.23% higher respectively. Foreign investors ran the trading session in the week accounting for a
mammoth 73% of total equity turnover but remaining long with a value of Kes.215Mn. Equity turnover rose 29% to
Kes.3Bn buoyed by the increased participation touching daily value of Kes.1Bn for the second time in the year.
Fixed Income: Uptick in Yields to Sustain… The 91, 182 and 364-Day papers were undersubscribed at 31%, 91% and
63% respectively. The regulator intends to raise Kes.8Bn this week as it auctions the 91 and 182-Day T-Bills.
Currency: Tea Export Inflows Cushion the KES… The KES was relatively stable in the week supported by tea
export inflows and low dollar demand. The national currency largest gain was in the ZAR/KES pair +4.77% with
further gains achieved in the GBP/KES pair +2.14% and KES/UGX +0.85%. The largest slip was recorded in the
INR/KES pair -1.58% with the sentiment echoed in the KES/TZS pair down 0.54%.
Commodities: Brent Oil Posts 2% Weekly Loss… On a volatile week, oil prices closed marginally lower (0.33%) at
USD112.02. The pressure due to a fragile global economy as the statistics amplified the situation, uncertainty
surrounding the Eurozone specifically the debt crisis and the scepticism surrounding the latest US employment
report. The US government looks set to extending further sanctions on Iran will have an effect on the oil price.
Weekly Market Monitor - No. 40
3
Equities:
Foreigners Run The Show… Despite the increased pressure on the NSE, the NSE 20 share index managed to close 6 points higher at 3975.79. The NASI
improved to 87.54 while the FTSE 15 and 25 indices closed 0.04% and 0.23% higher respectively. Foreign investors ran the
trading session in the week accounting for a mammoth 73% of total equity turnover but remaining long with a value of
Kes.215Mn. Equity turnover rose 29% to Kes.3Bn buoyed by the increased participation touching daily value of Kes.1Bn for
the second time in the year. Market Capitalisation was stable at Kes.1.15Tn.
"All intelligent investing is value investing -- acquiring more that you are paying for. You must value the business in order to value the stock." - Charlie Munger, Business Magnate, Vice Chair Berkshire Hathaway and Investor.
This week’s trading highlights are summarized below:
Table 1: NSE Performance Table 2: NSE Index Performance, Turnover
NSE 20 Share Index, Equity Turnover
Chart 2: Captures the trend of the Nairobi Stock Exchange – NSE 20 Share Index vs. Equity Turnover. Equity turnover crossed the Kes.1Bn mark
in the week for the second time in the year.
130,000,000
330,000,000
530,000,000
730,000,000
930,000,000
1,130,000,000
1,330,000,000
1,530,000,000
1,730,000,000
1,930,000,000
2,800
3,000
3,200
3,400
3,600
3,800
4,000
4,200
4,400
4,600
4,800
3-Jan-113-Mar-113-May-11 3-Jul-11 3-Sep-11 3-Nov-11 3-Jan-12 3-Mar-123-May-12 3-Jul-12 3-Sep-12
Equity Turnover NSE 20 Share Index
Weekly Market Monitor - No. 40
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Table 3: NSE Performance
Week 39 Week 40 % Change
Market Cap. (Kes.Bn) 1,155.99 1,158.09 0.18%
Equity T/O: (Kes.Mn) 2,348.64 3,018.81 28.53%
Bond T/O: (Kes.Mn) 16,814.70 16,767.15 -0.28%
Source: NSE, Genghis Capital
Our weekly segmental analysis (Table 4) shows the effect of the distribution pressure from last week
with four sectors gaining value versus six sectors losing. The market as a whole slipped 0.58% with
these developments.
The Banking segment was the best performing segment this week gaining 1.25%. This performance
was largely up due to Diamond Trust Bank Kenya Ltd (NSE: DTK) gaining 4.50% to VWAP Kes.116.00.
The Investment segment was at the bottom declining by 4.06%. Olympia Capital Holdings Ltd (NSE:
OCH) was down 10.81% to close at Kes.3.80.
NSE Segment Performance
Table 4: Weekly Segmental Price Performance Analysis
Source: NSE & Genghis Capital
Weekly Market Monitor - No. 40
5
NSE P/E Analysis
Six sectors moved into value territory in the week. The Advance/Decline ratio was relatively even at
22/24 explaining the relative flat performance in the overall market. The distribution activities slightly
edged accumulation activities though the effect of the accumulation activities informed the slight slip
in value of the overall market at 10.06.
Table 5: NSE P/E Analysis
Sector P/E Sector P/E
Week 39 Week 40
Agricultural 7 3.67 3.66 -0.27%
Automobiles & Accessories 4 NM NM NM
Banking 10 8.21 8.30 1.10%
Commercial & Services 9 8.79 8.70 -1.02%
Construction & Allied 5 12.48 12.31 -1.36%
Energy & Petroleum 4 7.25 7.28 0.41%
Insurance 6 11.09 11.05 -0.36%
Investment 4 10.20 9.98 -2.16%
Manufacturing & Allied 9 15.02 15.16 0.93%
Telecommunication & Technology 2 12.78 12.63 -1.17%
Main Market P/E 60 10.04 10.06 0.20%
Sector Constituents % Change
Source: NSE
Foreign Investor Activity
Total foreign investor equity turnover as a percentage of the total NSE turnover increased to 73.01% this
week compared to 63.52% at the close of the previous week.
Total net inflows at the end of the week stood at Kes.215.8Mn compared to Kes.308Mn last week.
Table 6: Weekly Foreign Equity Turnover Summary (Fig in KES)
Day Buy Sell Net Inflows
(Outflows)
Total NSE
Turnover
Foreign T/O (% of
Total NSE (T/O)
Mon 118,317,230.00 57,835,415.00 60,481,815.00 295,338,791.00 59.64%
Tue 238,675,690.00 122,226,715.00 116,448,975.00 577,366,452.00 62.51%
Wed 250,332,185.00 255,629,627.50 -5,297,442.50 720,291,542.00 70.24%
Thur 447,160,027.50 418,725,467.50 28,434,560.00 1,020,917,845.00 84.81%
Fri 160,211,732.50 144,528,152.50 15,683,580.00 418,217,732.00 72.87%
TOTAL 1,214,696,865.00 998,945,377.50 215,751,487.50 3,032,132,362.00 73.01%
Source: NSE & Genghis Capital Dealers
Foreign Turnover on the top 5 traded counters accounted for 69% of the total weekly foreign investor
activity at the close of Week 40 compared to 64% in Week 39.
The purchase activity on these counters accounted for 91% of the total foreign buying activity on the NSE
this week. The most actively bought counter was East African Breweries Ltd (NSE: EABL).
Weekly Market Monitor - No. 40
6
Table 7: Top 5 Foreign Traded Counters - Week 39 (Fig in KES)
Equity Buy Sell Net Inflows
(Outflows)
Total Weekly
Turnover
East African Breweries Ltd 629,482,450.00 611,731,550.00 17,750,900.00 1,241,214,000.00
Kenya Commercial Bank Ltd 318,537,700.00 218,226,162.50 100,311,537.50 536,763,862.50
Equity Bank Ltd 61,635,137.50 94,266,887.50 -32,631,750.00 155,902,025.00
Safaricom Ltd 61,848,987.50 37,042,610.00 24,806,377.50 98,891,597.50
British American Tobacco Ltd 38,934,200.00 6,751,000.00 32,183,200.00 45,685,200.00
TOTAL 1,110,438,475.00 968,018,210.00 142,420,265.00 2,078,456,685.00
Source: NSE & Genghis Capital Dealers
Trading Ideas:
The table below shows the performance of selected stocks that Genghis Capital recommended so far in the year 2012.
Table 8: Equity Picks (Fig in KES)
CompanyPrice at
Recommendation
12 Month
Target PriceCurrent Price
Upside
Potential
Return to
DateRecommendation
Centum Investments Ltd 14.55 19.55 11.95 38.87% -17.87% BUY
Equity Bank Limited 15.80 19.90 23.50 -18.09% 48.73% SELL
KenolKobil Limited 9.80 16.90 15.00 11.24% 53.06% HOLD
NIC Bank Limited 26.50 45.50 35.50 21.98% 33.96% BUY
EA Cables Ltd 11.80 14.55 11.10 23.71% -5.93% BUY
Athi River Mining Ltd 156.00 198.50 223.00 -12.34% 42.95% HOLD
Diamond Trust Bank Ltd 88.50 123.40 116.00 6.00% 31.07% BUY
KCB Group Ltd 18.50 27.10 28.00 -3.32% 51.35% HOLD
Uchumi Supermarkets Ltd 7.20 17.25 18.25 -5.80% 153.47% HOLD
Kenya Power & Lighting Co. 15.85 22.00 17.95 18.41% 13.25% BUY
Nation Media Group Ltd 153.00 197.70 212.00 -7.23% 38.56% HOLD
British American Investments 4.00 6.25 6.40 -2.40% 60.00% HOLD
Bamburi Cement Ltd 168.00 201.00 167.00 16.92% -0.60% BUY
Cooperative Bank Limited 11.55 18.50 11.95 35.41% 3.46% BUY
Kenya Reinsurance Corp. 10.05 15.35 12.05 21.50% 19.90% BUY
KenGen Ltd 8.30 16.25 8.65 46.77% 4.22% BUY
Jubilee Holdings Ltd 163.00 186.00 166.00 10.75% 1.84% HOLD
Housing Finance Ltd 13.65 27.00 14.60 45.93% 6.96% BUY
Scangroup Ltd 49.25 59.60 57.50 3.52% 16.75% HOLD
Portfolio Return 29.22%
Source: NSE & Genghis Capital
Weekly Market Monitor - No. 40
7
Genghis Index:
Table 10: Investors’ Diary
Source: NSE & Genghis Capital
Date Firm/Body Description
8th October CFC Last Day – Trading in Renounceable Rights
9th October SCBK First Day – Trading in Renounceable Rights
10th October CBK 182-Day T-bill Auction
11th October CBK 91-Day T-Bill Auction
12th October JUB Payment: Interim Dividend Kes.1.00
12th October BAMB Payment: Interim Dividend Kes.2.00
Table 9: Genghis Index Performance
Large-Cap Index
The index closed 0.38% higher in terms of price
performance with market capitalization following suit to
Kes. 998Bn.
Diamond Trust Bank Kenya Ltd (NSE: DTK) was the
segment’s best performing counter +4.50% - VWAP
Kes.116.
Mumias Sugar Co. Ltd (NSE: MSC) closed 4.65% lower at
VWAP 6.15.
Mid-Cap Index
Price performance shed 0.18% this week with market
capitalization down to Kes.140Bn.
B.O.C Kenya Ltd (NSE: BOC) was the segment’s best
performer up 9.80% - VWAP Kes.112.
E.A Portland Cement Company Ltd (NSE: PORT) was the
sector’s worst performing stock shedding 7.21% to close
with a VWAP of Kes.48.25.
Small-Cap Index
Crown Paints Kenya Ltd (NSE: BERG) was the segment’s
best performer advancing 9.35% to VWAP Kes.38.00.
Longhorn Kenya Ltd (NSE: LKL) was the worst
performing stock -18.28% VWAP Kes.11.40.
Weekly Market Monitor - No. 40
8
Fixed Income:
Uptick in Yields to Sustain…
Money Markets: Data from the CBK indicated that the average interbank rate closed the week
higher at 9.0532% compared to 8.3121% at the close of the previous week.
Primary Markets: The results of the 91, 182 and 364-Day T-Bill auctions for this week are shown
below. All the papers were undersubscribed as shown below. The regulator intends to raise
Kes.8Bn this week as it auctions the 91 and 182-Day T-Bills.
Table 11: Week 39 Auction Results
Weighted Avg. Rate
Tenor Last Latest Change (bps) Subscription Rate
91 Day 8.093% 8.439% 34.60 63%*
182 Day 9.888% 10.194% 30.60 91%*
364 Day 10.336% 10.570% 23.40 63%
Source: CBK, Genghis Capital *absolute terms
Secondary Markets: A relatively flat performance in the bond market as turnover marginally
slipped 0.28% to Kes.16.77Bn in turnover from last week’s close of Kes16.81Bn. The 15-Yr bonds
accounted for 35% of the total turnover at Kes.5.80Bn in 67 trades.
Table 7: Short -Term Interest Rates, Treasury Notes & CD’s
Tenor Kenya Uganda Tanzania U.S LIBOR (USD)
91 Day 8.09% 9.67% 12.45% 0.09% 0.35%
182 Day 9.89% 10.66% 13.01% 0.13% 0.63%
1 Year 10.57% 10.69% 13.76% 0.15% 0.97%
2 Year 11.11% 14.84% 13.81% 0.23% --
5 Year 11.86% 13.91% 14.49% 0.61% --
10 Year 12.71% 15.28% 14.99% 1.62% --
Source: CBK, BOU, BOT, US Treasury, BBA, Genghis Capital
Weekly Market Monitor - No. 40
9
Table 13: Fixed Income Gross Cash-Flows for the Month of October:
Source: CBK, NSE, Genghis Capital Estimates C- Coupon, P – Principal
NSE Yield Curve – Emergence of a flat Yield Curve as yields on the Short Term Paper have taken a dip in recent auctions with long dated
paper remaining stagnated.
0
5
10
15
20
25
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
6-Jan-12 31-Aug-12
Issue No. Govies
Cash Flow Due Date* Issued
Amount Coupon (%)
Gross - MM
FXD 1/2006/9 C 15-Oct-2012 3,060.25 13.50% 206.57
FXD 1/2007/10 C 22-Oct-2012 9,308.80 10.75% 500.35
FXD 1/2009/10 C 22-Oct-2012 4,966.85 10.75% 266.97
FXD 1/2010/10 C 22-Oct-2012 5,895.64 10.75% 316.89
FXD 1/2009/15 C 22-Oct-2012 9,420.45 12.50% 588.78
FXD 1/2007/6 C 22-Oct-2012 5,948.00 11.50% 342.01
FXD 2/2008/5 C 22-Oct-2012 4,095.80 9.50% 194.55
FXD 2/2011/2 C 22-Oct-2012 6,695.71 7.439% 249.05
FXD 4/2008/5 C 22-Oct-2012 10,007.50 9.50% 475.36
FXD 1/2012/2 C 29-Oct-2012 6,468.62 13.826% 447.18
FXD 2/2010/10 C 29-Oct-2012 14,462.47 9.307% 673.01
Evolution of the Yield Curve 13/01/2012 to 31/08/2012
Weekly Market Monitor - No. 40
10
Currency
Tea Export Inflows Cushion the KES…
Performance: The KES was relatively stable in the week supported by tea export inflows and low dollar demand.
The national currency largest gain was in the ZAR/KES pair +4.77% with further gains achieved in the GBP/KES pair
+2.14% and KES/UGX +0.85%. The largest slip was recorded in the INR/KES pair -1.58% with the sentiment echoed in
the KES/TZS pair down 0.54%. TAD maturities coupled with a decline in tourist arrivals could pose a downside risk
for the KES. Reforms in the insurance and pension sector are a boost to the Indian economy thou opponents
against the reforms bring a sense of uncertainty posing a higher volatility risk.
Table 14: Spot & Select Forward Ask Rates
Outright Forward Rates (Ask)
Pair/Cross Week 39 Week 40 Annualized
Volatility* 1M 2M 3M 6M
USD/KES 84.01
85.00
2.94% 85.75 86.62 87.35 89.84
GBP/KES 140.67 1137.65 17.84% 138.60 140.29 140.63 144.20
EUR/KES 110.15 110.61 10.12% 111.42 112.83 113.16 116.18
ZAR/KES 10.38 9.89 2.92% - - - -
KES/UGX 29.80 30.05 5.44% - - - -
KES/TZS 18.45 18.38 8.44% - - - -
INR/KES 1.61 1.64 10.32% - - - -
Source: CBK, Bloomberg, Genghis Capital Estimates *5 Day Annualized
Technical Analysis and Outlook: The Ichimoku chart below outlines the 1-Yr performance of the EURKES
currency pair. In majority of the period, the conversion line was below the Base line thus the huge pressure
on the EUR. The conversion line recently broke the Base line from below indicating strengthening of the EUR
against the KES.
Weekly Market Monitor - No. 40
11
Commodities
Brent Oil Posts 2% Weekly Loss…
Oil/Fuel: On a volatile week, oil prices closed marginally lower (0.33%) at USD112.02. The pressure due to a
fragile global economy as the statistics amplified the situation, uncertainty surrounding the Eurozone
specifically the debt crisis and the scepticism surrounding the latest US employment report. The US
government looks set to extending further sanctions on Iran will have an effect on the oil price.
Weekly Market Monitor - No. 40
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Weekly Market Monitor - No. 40
13
Contacts Report By: Moses Waireri,Research Analyst | Tel:+254 20 2774781 | Email: [email protected]
Report By: Evelyne Wanjiku, Research Analyst | Tel:+254 20 2774781 | Email: [email protected] Anthony Kimani, Research Analyst | Tel:+254 20 2774781 | Email: [email protected]
Carol Matu, Head Dealer | Tel: +254 20 2774789 | Email: [email protected] Gachanja Weru, Fixed Income Dealer| Tel:+25420 2774756 | Email: [email protected]
George Guy,Fixed Income Dealer | Tel:+254 20 2774756| Mob: +254 727 142231 | Email: [email protected] Nyawira Waithaka, Equity Dealer | Tel:+254 20 2774777 | Mob: +254 723 693481 | Email: [email protected] Andrew Maina, Senior Equity Dealer | Tel:+254 20 2774789 | Mob: +254 722 667936 | Email: [email protected]
Disclaimer: The content provided on this document is provided as general information and does not constitute advice or recommendation by Genghis Capital
Ltd and should not be relied upon for investment decisions or any other matter and that this document does not constitute a distribution recommending the
purchase or sale of any security or portfolio. Please note that past performance is no indication of future results. The ideas expressed in the document are
solely the opinions of the author at the time of publication and are subject to change without notice. Although the author has made every effort to provide
accurate information at the date of publication all information available in this report is provided without any express or implied warranty of any kind as to
its correctness. You should consult your own independent financial adviser to obtain professional advice before exercising any decisions based on the
information present in this document. Any action that you take as a result of this information, analysis, or advertisement is ultimately your responsibility.
Genghis Capital Ltd, Prudential Assurance Building, Wabera Street, Nairobi. Tel: +254 20 2774760Fax: +254 20 246334