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Recent Topicals

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Cytonn Note on the Monetary Policy Committee (MPC) Meeting for July 2019

Jul 17, 2019

The Monetary Policy Committee (MPC) is set to meet on Wednesday, 24th July 2019, to review the prevailing macro-economic conditions and make a decision on the direction of the Central Bank Rate (CBR). In their previous meeting held on 27th May 2019, the MPC maintained the CBR at 9.0%, citing that the economy was operating close to its potential and inflation expectations remained anchored within the target range, despite the possible spill overs of the food and fuel price increases, thus the prevailing monetary policy stance remained appropriate. This was in line with our expectations as per our MPC Note, informed by the country’s macroeconomic fundamentals, which had remained stable as well as sustained optimism on the economic growth prospects, as evidenced by: Inflation expectations, which had remained within the target range of 2.5%-7.5%, desp...

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Nairobi Metropolitan Area (NMA) Residential Report 2018/2019

Jul 14, 2019

This week, we look at performance in the residential sector over the 2018/2019 period, as we update the findings of the Nairobi Metropolitan Area Residential Report 2017/2018, which we released in July 2018. According to the report, residential sector in 2017/2018 registered an average return to investors of 8.2% (price appreciation and rental yields of 2.8% and 5.4%, respectively), which was 1.2% points lower than 9.4% in 2016/2017 (rental yields and capital appreciation of 5.6% and 3.8%, respectively). The decline in performance was attributed to a tough macroeconomic environment characterized by relatively low private sector credit growth, and the spillover effects of the protracted 2017 political elections. This year, we update the findings of the 2017/2018 report by looking at the residential market performance in 2018/2019 covering 41 markets across the Nairobi Metropolitan...

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Understanding the Derivatives Market

Jul 7, 2019

The Nairobi derivatives market began trading on Thursday 4th July 2019, with the purchase of three single stock futures contracts. This follows the successful completion of a six-month Derivatives Exchange Pilot Test between July and December 2018. This venture will make the Nairobi Securities Exchange (NSE) the second exchange in Sub-Saharan Africa to introduce derivatives trading after the Johannesburg Stock Exchange (JSE) in South Africa. In this week’s note, we shall discuss financial derivatives, highlighting the following: Background of Financial Derivatives, Nairobi Securities Exchange Derivatives Market (NEXT), African Case Study: South Africa’s Derivatives Market, and, Our Views, Expectations, and Conclusion. Section I: Background of Financial Derivatives A derivative is a financial contract whose value is derived/re...

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Kenya Macroeconomic Review

Jun 30, 2019

During the first half of 2019, we tracked Kenya GDP growth projections for 2019 released by 16 organizations, that comprised of research houses, global agencies, and government organizations. The average GDP growth, including Cytonn’s 2019 growth estimate of 5.8%, came in at 5.8%, unchanged from average projections released in Q1’2019. The common view is that GDP growth will remain stable in 2019, from a growth of 6.3% in 2018, the fastest economic growth since the 8.4% recorded in 2010. Economic growth is expected to be driven by: Stable growth in the agriculture sector on the back of favorable weather conditions despite delayed onset of the long rains in most parts of the country, Implementation of the Big 4 Agenda projects by the Kenyan Government, and, Recovery in the business environment as evidenced by the Stanbic Bank Monthly Purchasing Manager’s Index (PMI), which rose to 51.3 i...

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Sub-Saharan Africa Regional Review

Jun 30, 2019

Regional Economic Growth In April, the World Bank Group released a report titled ‘An Analysis of Issues Shaping Africa’s Economic Future’, projecting Sub-Saharan Africa (SSA) GDP to grow by 2.9% and 3.3% in 2019 and 2020, respectively, from a growth of 2.5% in 2018. This upturn is to be supported by oil exporting countries, with the demand side being supported by exports and private consumption, and the supply side being supported by a rebound in agriculture, increase in mining production, and stable growth in the services sector in some countries. Overall growth is expected to be affected by the external environment as global growth continues to decelerate and global uncertainty abounds due to trade disputes between the United States and China, SSA’s major trading partners. Consequently, the outlook on commodity prices and the oil market is highly uncertain because of expected spill-over effects, especially towards commodity-driven e...

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