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Recent Topicals

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Fixed Income

Mar 31, 2019

T-Bills & T-Bonds Primary Auction: During the first quarter of 2019, T-bills were oversubscribed, with the overall subscription rate coming in at 157.2%, up from 74.3% in Q4’2018. The oversubscription was partly attributable to improved liquidity in the market during the quarter, which saw the average interbank rate declining to an average of 3.1%, from an average of 5.1% in Q4’2018, supported by government payments and debt maturities. Overall subscriptions for the 91, 182, and 364-day papers came in at 110.0%, 111.4% and 221.9% in Q1’2019, from 107.1%, 37.7% and 97.7% in Q4’2018, respectively, with investors’ participation remaining skewed towards the longer dated paper. The demand for the longer-dated paper is attributable to the scarcity of newer short-term bonds in the primary market. Yields on the 91-day T-bill rose by 20 bps to close at 7.5% in Q1’2019, from 7.3% in Q4’2018, while yields on the 182-day and...

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The Role of the Capital Markets in Economic Development

Mar 24, 2019

Ensuring economic growth and development is a primary objective of all countries. According to the World Bank, an estimated USD 4.0 trillion in annual investment is required for developing countries to achieve the Sustainable Development Goals (SDGs) by 2030. In light of the investment requirement, there is a greater need to develop and strengthen capital markets in order to mobilize commercial financing. The role that capital markets have in financing infrastructure development, large enterprises, and Small and Medium Enterprises (SMEs), and the links with economic growth, are increasingly being highlighted. Economists traditionally have looked to factors such as capital, labor and technology as the major factors affecting economic growth. The recent financial crisis has shown that there are substantial economic effects when there is lack of confidence in the financial systems. Therefore, the functioning of financial systems has received special attention in academic litera...

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

Mar 21, 2019

Disclaimer: The views expressed in this publication are those of the writers where particulars are not warranted. This publication, which is in compliance with Section 2 of the Capital Markets Authority Act Cap 485A, is meant for general information only and is not a warranty, representation, advice or solicitation of any nature. Readers are advised in all circumstances to seek the advice of a registered investment advisor. The Monetary Policy Committee (MPC) is set to meet on Wednesday, 27th March 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 28th January 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 thus the prevailing monetary policy stance remained appropriate. This was in line w...

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Ruaka Real Estate Investment Opportunity

Mar 17, 2019

In June 2018, we published a Research Note on Ruaka suburb, where Cytonn has two residential developments, The Alma and Taraji Heights. According to the June 2018 note, the area recorded average returns of 11.1% p.a, with the rental yield and capital appreciation coming in at 5.3% and 5.8%, respectively. This week, we look into why the area is still a great investment opportunity, by updating and analyzing our research data as at December 2018 that shows Ruaka’s residential market performance in terms of uptake, rental yield, capital appreciation and return to investors in the real estate sector. The performance in 2018 came in at...

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Performance by Retirement Benefits Schemes in Kenya

Mar 10, 2019

The Retirement Benefits Industry plays a huge role in the economy. According to the Organization for Economic Co-operation and Development (OECD) in 2017, assets in Retirement Benefits Schemes totaled 50.7% of GDP in the OECD countries and 19.7% of total GDP in the non-OECD jurisdictions. It is clear that most non-OECD countries still have a long way to go in the growth of the sector. In Kenya, the Retirement Benefits Assets as a percentage of GDP stood at 13.4%, compared to more developed markets like the USA at 84.1% and the UK at 105.3%. Over the last decades, we have seen reforms and education initiatives by the Retirement Benefits Authority (RBA) to educate people on the importance of saving for retirement. The industry has registered great growth from both member contribution and good performances leading to the assets under management growing to Kshs 1,166.6 bn in 2018, from Kshs 287.7 bn 10-years ago, which is a compound annual growth rate of 14.3% over the 10-years.

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