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November 19, 2018

NSE up ahead of MPC’s post rate caps meet

Nairobi stock exchange NSE
Nairobi stock exchange NSE

The Central Bank of Kenya’s Monetary Policy Committee meets today for the first time since the Interest Rate Capping Bill was signed into law.

The International Monetary Fund's deputy managing director Mitsuhiro Furusawa said in Nairobi last week: “Linking deposit and lending rates to the central bank’s policy rate may compromise the independence of the central bank, and hamper its ability to enact monetary policy towards achieving its main objectives, that is to maintain price and financial stability and to support the economy.”

 Furusawa warned that the “politicisation of monetary policy” bears risks for a sound financial system and for credit access, especially to risky borrowers.

 “These would include…inefficiencies in the credit market… and undermining the effectiveness of monetary policy transmission,” said Citi Global Markets.

 The Citi analysts said the Kenyan situation called for a change in banking models because the extent of the rate cap was more draconian than in other countries where such restrictions have been put in place.

 The bourse started on a positive note yesterday with the Nairobi All Share rallying +0.66 points to close at 132.24.

The Nairobi NSE20 firmed 12.76 points to close at 3218.88.

Equity turnover was subdued at Sh283.719 million.

 Safaricom firmed 0.539% to regain the Sh19.00 level and traded 2.168 milion shares worth Sh41.237m. I have a year end price Target of Sh22.50 which is an 18.42% rise through year-end.

 Uchumi rebounded 7.575% to close at Sh3.55 and traded 18,900 shares. Buyers outpaced sellers by a ratio of 9 to 1.

 CfC Stanbic Bank eased 2.53% to close at Sh77.00 and traded heavy volume [versus its moving average] of 1.232 million shares worth Sh94.865 million. CfC has bucked the downdraft that has engulfed banking stocks in 2016, and is in fact +2.024% on a Total Return Basis. CfC reported a 21.976% acceleration in half-year 2016, but that was before the interest rate Bill was signed into law.

KCB Group rebounded 0.95% to close at Sh26.00 and traded 570,300 shares.

Equity Group which carved out an aggressive posture last week [taking the battle to the likes of M-Shwari] closed unchanged at Sh25.50 and traded 1.257 million shares.

 The Stanlib Fahari I-Reit rallied a further 5.33% to close at Sh14.80. Stanlib Fahari I-Reit has rallied 34.54% this month, but remains minus 32.72% year-to-date.

 EABL rallied 3.54% to close at a six-week high of Sh263.00 on a volume of 50,100 shares. EABL was caught up in the banking downdraft and still has more head-room.

 ARM which is surely a big beneficiary of the interest rate cap, firmed 1.96% to close at Sh26.00 and traded 602,100 shares.

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