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Weekly Market Monitor - No. 41/2012

Weekly Market Monitor - No. 01

Genghis Capital Research: Equities, Fixed Income, Currency, Commodities

Genghis Capital Research: Equities, Fixed Income, Currency, Commodities Themes: Momentum Building, Yield Upturn, Transmission of Global Uncertainty & Risks... 

Equities: 5 Points Shy of 4,000…

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Fixed Income:Higher Opportunity Cost for Primary…

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Currency:KES Stable As Yield Uptick Prevails…

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Commodities:Demand Concerns Troubles Oil Markets…

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Weekly Market Monitor - No. 41

Executive Summary Themes: Momentum Building, Yield Upturn, Transmission of Global Uncertainty & Risks... 

Equities: 5 Points Shy of 4,000… A dominant performance in the market as the NSE 20 Share index closed at 3995.03; just a touch from the resistance level of 4,000. Improved accumulation activities pushed up the rest of the Indices with the NASI gaining 0.17 points while the FTSE 15 and 25 Indices closed +0.39% and +0.45% respectively. Equity turnover declined 60% to Kes.1.23Bn in the week though with the improved share prices market capitalization improved to Kes. 1.16Tn.

Fixed Income: Higher Opportunity Cost for Primary…The 91 and 182-Day papers were undersubscribed at 63% and 88% respectively. The regulator intends to raise Kes.8Bn this week as it auctions the 91 and 182-Day T-Bills.

Currency: KES Stable As Yield Upticks Prevail… The KES was fairly stable in the week supported by liquidity mop ups and rising yields. The national currency’s largest gain was in the INR/KES and KES/UGX pairs both up 1.59% with further gains achieved in the GBP/KES pair +0.50% and EUR/KES +0.07%. The largest slip was recorded in the KES/TZS pair -0.27% with the sentiment echoed in the ZAR/KES pair down 0.15%.

Commodities: Demand Concerns Trouble Oil Markets… The KES was fairly stable in the week supported by liquidity mop ups and rising yields. The national currency’s largest gain was in the INR/KES and KES/UGX pairs both up 1.59% with further gains achieved in the GBP/KES pair +0.50% and EUR/KES +0.07%. The largest slip was recorded in the KES/TZS pair -0.27% with the sentiment echoed in the ZAR/KES pair down 0.15%.

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Weekly Market Monitor - No. 41

Equities: 5 Points Shy of 4,000… A dominant performance in the market as the NSE 20 Share index closed at 3995.03; just a touch from the resistance level of 4,000. Improved accumulation activities pushed up the rest of the Indices with the NASI gaining 0.17 points while the FTSE 15 and 25 Indices closed +0.39% and +0.45% respectively. Equity turnover declined 60% to Kes.1.23Bn in the week though with the improved share prices market capitalization improved to Kes. 1.16Tn. the long awaited UMEME IPO will commence on Monday 15th October in Uganda floating 622Mn shares at UGX 275 (Kes.9) per share. Some of these shares will be cross listed on the NSE. "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 4,800

1,930,000,000

4,600

1,730,000,000

4,400

1,530,000,000

4,200

1,330,000,000

4,000

1,130,000,000

3,800 3,600

930,000,000

3,400

730,000,000

3,200

530,000,000

3,000

330,000,000

2,800 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

130,000,000

Equity Turnover

NSE 20 Share Index

Chart 2: Captures the trend of the Nairobi Stock Exchange – NSE 20 Share Index vs. Equity Turnover. NSE 20 continues creeping up towards 4,000 closing 5 points shy.

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Weekly Market Monitor - No. 41 Table 3: NSE Performance

Week 40

Week 41

Market Cap. (Kes.Bn)

1,158.09

1,160.40

% Change 0.20%

Equity T/O: (Kes.Mn)

3,018.81

1,233.87

-59.13%

Bond T/O: (Kes.Mn)

16,767.15

14,563.15

-13.14%

Source: NSE, Genghis Capital

Our weekly segmental analysis (Table 4) shows the effect of the increased pressure from last week with four sectors gaining value versus six sectors losing. The market as a whole marginally slipped 0.02% with these developments.

The Investment segment bounced back from last week to be the best performing this week gaining 1.58%. This performance was largely up due to Olympia Capital Holdings Ltd (NSE: OCH) gaining 9.09% to VWAP Kes.3.60.

The Energy & Petroleum segment was at the bottom declining by 1.30%. KenolKobil Ltd (NSE: KENO) was down 5.67% to close at Kes.14.15.

NSE Segment Performance Table 4: Weekly Segmental Price Performance Analysis

Source: NSE & Genghis Capital

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Weekly Market Monitor - No. 41

NSE P/E Analysis 

Four sectors moved into value territory in the week. The Advance/Decline ratio was relatively even at 24/21 explaining the relative flat performance in the overall market. The accumulation activities slightly edged distribution activities as the effect of the accumulation activities informed the slight slip in value of the overall market at 10.08. Table 5: NSE P/E Analysis

Sector

Constituents

Agricultural

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Sector P/E Sector P/E Week 40

Week 41

3.66

3.73

% Change 1.91%

Automobiles & Accessories

4

NM

NM

NM

Banking

10

8.30

8.27

-0.36%

Commercial & Services Construction & Allied Energy & Petroleum Insurance

9 5 4 6

8.70 12.31 7.28 11.05

8.74 12.60 7.20 10.92

0.46% 2.36% -1.10% -1.18%

Investment

4

9.98

9.90

-0.80%

Manufacturing & Allied

9

15.16

15.18

0.13%

Telecommunication & Technology

2

12.63

12.78

1.19%

60

10.06

10.08

0.20%

Main Market P/E Source: NSE

Foreign Investor Activity 

Total foreign investor equity turnover as a percentage of the total NSE turnover slumped to 35.76% this week compared to 73.01% at the close of the previous week.

Total net inflows at the end of the week stood at Kes.212.1Mn compared to Kes.215.8Mn 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

20,119,055.00

19,592,812.50

526,242.50

155,656,237.00

25.51%

Tue

65,149,345.00

19,365,127.50

45,784,217.50

319,340,572.00

26.47%

Wed

101,040,925.00

30,943,522.50

70,097,402.50

374,873,159.00

35.21%

Thur

142,670,877.50

71,101,097.50

71,569,780.00

389,309,894.00

54.91%

Fri

28,569,967.50

4,436,370.00

24,133,597.50

167,298,323.00

19.73%

TOTAL

357,550,170.00

145,438,930.00

212,111,240.00

1,406,478,185.00

35.76%

Source: NSE & Genghis Capital Dealers

Foreign Turnover on the top 5 traded counters accounted for 26% of the total weekly foreign investor activity at the close of Week41 compared to 69% in Week 40.

The purchase activity on these counters accounted for 70% of the total foreign buying activity on the NSE this week. The most actively bought counter was East African BreweriesLtd (NSE: EABL).

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Weekly Market Monitor - No. 41 Table 7: Top 5 Foreign Traded Counters - Week 41(Fig in KES)

Buy

Sell

Net Inflows (Outflows)

Total Weekly Turnover

East African Breweries Ltd

79,996,700.00

67,612,500.00

12,384,200.00

147,609,200.00

Equity Bank Ltd

58,290,850.00

4,353,362.50

53,937,487.50

62,644,212.50

Kenya Airways Limited

29,276,300.00

30,366,007.50

-1,089,707.50

59,642,307.50

Safaricom Ltd

49,364,300.00

7,548,035.00

41,816,265.00

56,912,335.00

Kenya Commercial Bank Ltd

34,001,675.00

7,017,500.00

26,984,175.00

41,019,175.00

250,929,825.00

116,897,405.00

134,032,420.00

367,827,230.00

Equity

TOTAL 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)

Company Centum Investments Ltd

Price at Recommendation 14.55

12 Month Current Price Target Price 19.55 12.05

Upside Potential 38.36%

Return to Date -17.18%

Equity Bank Limited

15.80

19.90

23.25

-16.83%

47.15%

KenolKobil Limited NIC Bank Limited EA Cables Ltd Athi River Mining Ltd Diamond Trust Bank Ltd KCB Group Ltd Uchumi Supermarkets Ltd Kenya Power & Lighting Co. Nation Media Group Ltd British American Investments Bamburi Cement Ltd Cooperative Bank Limited Kenya Reinsurance Corp. KenGen Ltd Jubilee Holdings Ltd Housing Finance Ltd Scangroup Ltd Portfolio Return

9.80 26.50 11.80 156.00 88.50 18.50 7.20 15.85 153.00 4.00 168.00 11.55 10.05 8.30 163.00 13.65 49.25

16.90 45.50 14.55 220.00 123.40 27.10 17.25 22.00 197.70 6.25 201.00 18.50 15.35 16.25 186.00 27.00 59.60

14.15 36.00 11.15 235.00 120.00 28.00 19.35 18.20 215.00 6.20 170.00 11.90 12.05 8.60 165.00 15.15 56.00

16.27% 20.88% 23.37% -6.82% 2.76% -3.32% -12.17% 17.27% -8.75% 0.80% 15.42% 35.68% 21.50% 47.08% 11.29% 43.89% 6.04%

44.39% 35.85% -5.51% 50.64% 35.59% 51.35% 168.75% 14.83% 40.52% 55.00% 1.19% 3.03% 19.90% 3.61% 1.23% 10.99% 13.71% 30.27%

Recommendation

BUY SELL HOLD BUY BUY HOLD HOLD HOLD HOLD BUY HOLD HOLD BUY BUY BUY BUY HOLD BUY HOLD

Source: NSE & Genghis Capital

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Weekly Market Monitor - No. 41

Genghis Index: Table 9: Genghis Index Performance Large-Cap Index 

The index closed 0.68% higher in terms of price performance with market capitalization following suit to Kes. 1,003Bn.

Athi River Mining Ltd (NSE: ARM) was the segment’s best performing counter +5.38% - VWAP Kes.235.

CfC Stanbic Holdings of Kenya Ltd (NSE: CFC) closed 2.53% lower at VWAP 38.50.

Mid-Cap Index 

Price performance shed 1.43% this week with market capitalization down to Kes.134Bn.

Uchumi Supermarkets Ltd (NSE: UCHM) was the segment’s best performer up 6.03% - VWAP Kes.19.35.

Carbacid Investments Ltd (NSE: CARB) was the sector’s worst performing stock shedding 9.76% to close with a VWAP of Kes.111.

Small-Cap Index 

Williamson Tea Kenya Ltd (NSE: WTK) was the segment’s best performer advancing 7.50% to VWAP Kes.215.

Longhorn Kenya Ltd (NSE: LKL) was the worst performing stock -10.09% VWAP Kes.10.25.

Table 10: Investors’ Diary

Date 15th–18th October 15th October 15th October 17th October 18th October

Firm/Body

Description

SCBK

Trading in Renounceable Rights

EGAD UMEME CBK CBK

Posting of Bonus Share 1:1 IPO Begins at UGX. 275 per Share 182-Day T-bill Auction 91-Day T-Bill Auction

S S0urce: NSE & Genghis Capital

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Weekly Market Monitor - No. 41

Fixed Income: Higher Opportunity Cost for Primary… 

Money Markets: Data from the CBK indicated that the average interbank rate closed the week higher at 8.9161% compared to 9.1366% at the close of the previous week.

Primary Markets: The results of the 91 and 182-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 41 Auction Results

Weighted Avg. Rate Tenor Last 91 Day 8.439% 182 Day 10.194%

Latest 8.962% 10.307%

Change (bps) 52.30 11.30

Subscription Rate 63%* 88%*

Source: CBK, Genghis Capital

*absolute terms

Secondary Markets: Bond Turnover closed 13% lower on the back of reduced participation as 143 transactions occurred in the week compared to 254 last week. The 15-Yr bonds accounted for 37% of the total turnover at Kes.5.39Bn in 57 trades. Table 7: Short -Term Interest Rates, Treasury Notes & CD’s

Tenor

Kenya

Uganda

Tanzania

U.S

LIBOR (USD)

91 Day

8.96%

9.67%

12.45%

0.11%

0.35%

182 Day

10.31%

10.66%

13.01%

0.15%

0.62%

1 Year

10.57%

10.69%

13.76%

0.18%

0.95%

2 Year

11.11%

14.84%

13.81%

0.27%

--

5 Year

11.86%

13.91%

14.49%

0.67%

--

10 Year

12.71%

15.28%

14.99%

1.69%

--

Source: CBK, BOU, BOT, US Treasury, BBA, Genghis Capital

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Weekly Market Monitor - No. 41 Table 13: Fixed Income Gross Cash-Flows for the Month of October:

Issue No. Govies

Cash Flow

Due Date*

Issued Amount

Coupon (%)

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

Source: CBK, NSE, Genghis Capital Estimates

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Gross - MM

C- Coupon, P – Principal

Evolution of the Yield Curve 13/01/2012 to 31/08/2012

20

15

10

5

0 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

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.

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Weekly Market Monitor - No. 41 Currency KES Stable as Yield Uptick Prevails… 

Performance: The KES was fairly stable in the week supported by liquidity mop ups and rising yields. The national currency’s largest gain was in the INR/KES and KES/UGX pairs both up 1.59% with further gains achieved in the GBP/KES pair +0.50% and EUR/KES +0.07%. The largest slip was recorded in the KES/TZS pair -0.27% with the sentiment echoed in the ZAR/KES pair down 0.15%. 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 USD/KES GBP/KES

Week 40 85.00 137.65

Week 41 85.13 136.96

EUR/KES

110.61

ZAR/KES

9.89

KES/UGX

7.00%

1M 85.88 138.09

2M 86.73 139.59

3M 87.53 140.03

6M 89.98 142.49

110.53

7.30%

111.49

112.73

113.15

115.68

9.90

26.19%

-

-

-

-

30.05

30.53

-

-

-

-

KES/TZS

18.38

18.50

11.62% % 10.51%

-

-

-

-

INR/KES

1.64

1.61

8.92%

-

-

-

-

Source: CBK, Bloomberg, Genghis Capital Estimates

Annualized Volatility* 0.95%

*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.

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Weekly Market Monitor - No. 41 Commodities Demand Concerns Troubles Oil Marketsâ&#x20AC;Ś ď&#x201A;§

Oil/Fuel: Brent Crude fell USD 1.09 to settle at USD 114.62 though a 2% gain on a week on week analysis. Oil marketers have been balancing on expectations of weak global demand and increased risk of output disruption in the Middle East. Trades have been long on contracts indicating their perception that there will be a higher upside effect on oil prices but overall there is so much uncertainty surrounding the market. To this effect the ERC increased pump prices by Kes. 6.31 for premium, Kes. 5.04 for diesel and Kes. 6.36 for Kerosene.

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Weekly Market Monitor - No. 41

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Weekly Market Monitor - No. 41

Contacts Report By: Moses Waireri,Research Analyst | Tel:+254 20 2774781 | Email: mwaireri@genghis-capital.com Report By: Evelyne Wanjiku, Research Analyst | Tel:+254 20 2774781 | Email: ewanjiku@genghis-capital.com Anthony Kimani, Research Analyst | Tel:+254 20 2774781 | Email: akimani@genghis-capital.com Carol Matu, Head Dealer | Tel: +254 20 2774789 | Email: cmatu@genghis-capital.com Gachanja Weru, Fixed Income Dealer| Tel:+25420 2774756 | Email: gweru@genghis-capital.com George Guy,Fixed Income Dealer | Tel:+254 20 2774756| Mob: +254 727 142231 | Email: gguy@genghis-capital.com Nyawira Waithaka, Equity Dealer | Tel:+254 20 2774777 | Mob: +254 723 693481 | Email: nwaithaka@genghis-capital.com Andrew Maina, Senior Equity Dealer | Tel:+254 20 2774789 | Mob: +254 722 667936 | Email: amaina@genghis-capital.com 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 13


Genghis Capital - Weekly Market Monitor - Week 41