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Weekly Market Monitor - No. 45/2012

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: NSE Rallying Towards 4300…

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Fixed Income: Higher Demand For the 91-Day T-Bill…

8

Currency: KES Manages to Hold its Own…

11

Commodities: OPEC to Cut Supply in 2013…

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Weekly Market Monitor - No. 45 Executive Summary Themes: Momentum Building, Yield Upturn, Transmission of Global Uncertainty & Risks... 

Equities: NSE Rallying Towards 4300...The NSE 20 Share index recovered from previous losses gaining 33.98 points in the week setting a new high of 4159.73. The FTSE 15 and FTSE 25 also closed in the green gaining 2.06% and 1.93% respectively. The NASI had a 1.80% gain to close at 92.94. Local Investors maintained market dominance at 61% as foreigners had a net inflow position at Kes.647.2Mn.Market Capitalization surged to Kes.1.24Tn.

Fixed Income: Higher Demand for 91-Day T-Bill... Yields maintain upward trend on all papers.

Currency: KES Manages to Hold Its Own…The KES was stable in the week thou it lost gains made last week on the KES/TZS losing -0.07%. On the other hand it gained on all major currencies with the largest gains were against the INR +1.48% and EUR/KES pair up 1.45%.

Commodities: OPEC to Cut Supply in 2013… In the just published OPEC report, the 12-member group cut its forecasts for crude oil demand in the next year with production decreasing in October. The group would need to produce 29.7Mn a day in 2013, 1.25Mn less than current production and 100,000 less than its estimates a month ago. The 0.2% decline in October was on the back of reduced production in Nigeria, Iran and Saudi Arabia. Brent Crude oil remains steady at USD106.95 despite this news.

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Weekly Market Monitor - No. 45 Equities: NSE Rallying Towards 4,300… The NSE 20 Share index recovered from previous losses gaining 33.98 points in the week setting a new high of 4159.73. Positive earnings by Safaricom Ltd overshadowed the negative earnings announced by Kenya Airways Ltd to boost the market to new heights. Renewed investor confidence in E.A Portland Cement saw the share gain 30% to close at a VWAP of Kes.41.75. The FTSE 15 and FTSE 25 also closed in the green gaining 2.06% and 1.93% respectively. The NASI had a 1.80% gain to close at 92.94. Local Investors maintained market dominance at 61% as foreigners had a net inflow position at Kes.647.2Mn.Market Capitalization surged to Kes.1.24Tn. "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 Index NASI

Market Summary Previous Today 91.30 92.94 4125.74 121.87

4159.73 124.38

0.82% 2.06%

124.53

126.93

1.93%

Gaining Stocks Equity

Price (KES)

% Change

EA Portland Cement

41.75

30.47%

Longhorn Ltd

10.00

11.11%

Safaricom Ltd

4.80

10.34%

NSE 20 Share FTSE NSE 15

Carbacid Investments Ltd

125.00

8.70%

FTSE NSE 25

NIC Bank Ltd

41.25

7.14%

Top Traders

Losing Stocks Equity

% change 1.80%

Price (KES)

% Change

Eaagads Ltd

26.75

21.32%

Eveready Ltd

1.60

5.88%

Kenya Airways Ltd

11.70

5.26%

Centum Investments Ltd

12.30

4.65%

HFCK Ltd

14.80

4.52%

Equity Safaricom Ltd Equity Bank Ltd KenolKobil Ltd Kenya Commercial Bank Ltd Co-operative Bank of Kenya Ltd

Volume 90,261,100 14,196,800 8,402,400 7,756,700 6,460,300

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-11

130,000,000 3-Apr-11

3-Jul-11

3-Oct-11

3-Jan-12

Equity Turnover

3-Apr-12

3-Jul-12

3-Oct-12

NSE 20 Share Index

Chart 2: Captures the trend of the Nairobi Stock Exchange – NSE 20 Share Index vs. Equity Turnover. Momentum has seen the NSE 20 breach the 4,100 level; next resistance target is 4,300.

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Weekly Market Monitor - No. 45 Table 3: NSE Performance

Market Cap. (Kes.Bn) Equity T/O: (Kes.Mn) Bond T/O: (Kes.Mn)

Week 44 1,212.19 2,986.82 18,049.75

Week 45 1,238.75 1,823.49 8,838.10

% Change 2.19% -38.95% -51.03%

Source: NSE, Genghis Capital

Our weekly segmental analysis (Table 4) shows an improvement in market performance this week with five sectors gaining value versus only four shedding. The market as a whole gained 0.93% with these developments.

The Construction & Allied Segment reversed last week’s losses to emerge as the best performer this week gaining 5.90%. This performance is attributed to E.A Portland Cement Company Ltd (NSE: EAPC) gaining 30.47% to VWAP Kes.41.75 up from last week’s close of Kes.32.00.

The Agricultural Segment slumped to the bottom down 2.82% dragged down Eaagads Ltd (NSE: EGDS) which was down 21.32% to close at Kes.26.75.

NSE Segment Performance Table 4: Weekly Segmental Price Performance Analysis

Sector Construction & Allied Telecommunication & Technology Energy & Petroleum Banking Manufacturing & Allied Automobiles & Accessories Investment Insurance Commercial & Services Agricultural

Constituents 5 2 4 10 9 4 4 6 9 7 60

% change 5.90% 5.72% 2.03% 0.50% 0.18% -0.33% -0.42% -0.71% -0.71% -2.82% 0.93%

Source: NSE & Genghis Capital

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Weekly Market Monitor - No. 45

NSE P/E Analysis 

Three sectors closed in the value territory in the week. The Advance/Decline ratio exhibited an investors’ selling sentiment at 25/21. Table 5: NSE P/E Analysis

Sector

Constituents

Sector P/E Sector P/E % Change Week 44 Week 45 3.73 3.65 -2.14% NM NM NM 8.75 8.75 0.00% 9.33 9.42 0.96% 15.57 15.60 0.19% 7.16 7.27 1.54% 11.15 11.10 -0.45%

Agricultural Automobiles & Accessories Banking Commercial & Services Construction & Allied Energy & Petroleum Insurance

7 4 10 9 5 4 6

Investment

4

10.56

10.47

-0.85%

Manufacturing & Allied

9

15.47

15.48

0.06%

Telecommunication & Technology Main Market P/E

2 60

13.55 10.50

14.95 10.76

10.33% 2.48%

Source: NSE

Foreign Investor Activity 

Total foreign investor equity turnover as a percentage of the total NSE turnover continued to decrease this week, from 39.73% last week compared to 39.13% recorded this week.

Total net inflows at the end of the week stood at Kes.323.61Mn compared to 621.43Mn last week. Table 6: Weekly Foreign Equity Turnover Summary (Fig in KES) Foreign Equity Turnover Net Inflows Sell (Outflows)

Total NSE Turnover

Foreign T/O (% of Total NSE (T/O)

-7,119,532.50

316,102,723.00

34.46%

32,329,862.50

62,340,245.00

314,866,163.00

40.33%

231,230,600.00

75,174,845.00

156,055,755.00

581,269,815.00

52.71%

Thur

67,070,360.00

28,317,160.00

38,753,200.00

324,041,324.00

29.44%

Fri

74,490,690.00

911,060.00

73,579,630.00

286,211,317.00

26.34%

TOTAL

518,364,560.00

194,755,262.50

323,609,297.50

1,822,491,342.00

39.13%

Day

Buy

Mon

50,902,802.50

58,022,335.00

Tue

94,670,107.50

Wed

Source: NSE & Genghis Capital Dealers

Foreign Turnover on the top 5 traded counters accounted for 30.7% of the total weekly foreign investor activity at the close of Week 45 compared to 48.4% in Week 44.

The purchase activity on these counters accounted for 83.0% of the total foreign buying activity on the NSE this week. The most actively bought counter was Equity Bank Limited (NSE: EQTY).

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Weekly Market Monitor - No. 45 Table 7: Top 5 Foreign Traded Counters - Week 45 (Fig in KES)

87,365,075.00

Net Inflows (Outflows) 153,408,775.00

Total Weekly Turnover 328,138,925.00

195,083,225.00

112,958,950.00

82,124,275.00

308,042,175.00

East African Breweries Ltd

220,075,000.00

168,000.00

219,907,000.00

220,243,000.00

Kenya Commercial Bank

117,519,650.00

48,011,875.00

69,507,775.00

165,531,525.00

KenolKobil Ltd

87,929,985.00

9,660,000.00

78,269,985.00

97,589,985.00

TOTAL 430,690,855.00 Source: NSE & Genghis Capital Dealers

129,081,950.00

301,608,905.00

559,772,805.00

Equity

Buy

Sell

Equity Bank Ltd

240,773,850.00

Safaricom Ltd

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 12 Month Recommendation Target Price 14.55 19.55

Current Price 12.30

Upside Potential 37.08%

Return to Date -15.46%

Equity Bank Limited

15.80

19.90

24.25

-21.86%

53.48%

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 Sasini 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 10.90 13.65 49.25

16.90 45.50 14.55 220.00 123.40 33.10 22.25 21.00 233.60 6.25 201.00 18.50 15.35 16.25 186.00 15.50 27.00 59.60

14.95 41.25 11.25 223.00 120.00 30.00 19.45 18.30 227.00 6.25 176.00 12.55 12.45 9.70 169.00 11.60 14.80 63.50

11.54% 9.34% 22.68% -1.36% 2.76% 9.37% 12.58% 12.86% 2.83% 0.00% 12.44% 32.16% 18.89% 40.31% 9.14% 25.16% 45.19% -6.54%

52.55% 55.66% -4.66% 42.95% 35.59% 62.16% 170.14% 15.46% 48.37% 56.25% 4.76% 8.66% 23.88% 16.87% 3.68% 6.42% 8.42% 28.93% 33.71%

Recommendation

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

Source: NSE & Genghis Capital

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Weekly Market Monitor - No. 45 Genghis Index: Table 9: Genghis Index Performance Large-Cap Index

Genghis Large-Cap Index Indicator Price Index Performance (%) Market Capitalization (Kes.Bn) No. of Shares Traded (000) P/E Ratio

Previous Current % Change 0.51% 0.97% N/A 1047.910 1072.358 2.33% 79,715 135,539 70.03% 10.35x 10.48x N/A

Genghis Mid-Cap Index Indicator Previous Price Index Performance (%) -1.50% Market Capitalization (Kes.Bn) 137.018 No. of Shares Traded (000) 18,806 P/E Ratio 6.14x

Current -1.50% 138.946 27,165 6.19x

% Change N/A 1.41% 44.45% N/A

Genghis Small-Cap Index Indicator Previous Price Index Performance -1.13% Market Capitalization (Kes.Bn) 13.603 No. of Shares Traded (000) 329 P/E Ratio 10.32x

Today -1.20% 13.246 377 9.83x

% Change N/A -2.62% 14.73% N/A

The index appreciated a further 0.97% in terms of price performance with market capitalization following suit to Kes.1,072Bn.

Safaricom Ltd (NSE: SCOM) was the segment’s best performing counter +10.34% - VWAP Kes.4.80.

Kenya Airways Ltd (NSE: KQ) closed 5.26% lower at VWAP Kes.11.70.

Mid-Cap Index 

Price performance declined another 1.50% this week with market capitalization flat at Kes.139Bn.

E.A Portland Cement Co. Ltd (NSE: EAPCC) reversed previous losses to become the segment’s best performer up 30.37% - VWAP Kes.41.75.

Centum Investment Co. Ltd (NSE: ICDC) was the sector’s worst performing stock shedding 4.65% to close with a VWAP of Kes.12.30.

Source: Genghis Capital

Small-Cap Index 

Longhorn Kenya Ltd (NSE: LKL) came from the bottom last week to the segment’s best performer advancing 11.11% to VWAP Kes.10.00.

Eaagads Kenya Ltd (NSE: EGDS) was the worst performing stock -21.32% VWAP Kes.26.75.

Table 10: Investors’ Diary

Date 14th November 14th November 15th November 16th November

Firm/Body Carbacid Investments Co. Ltd CBK CBK Eaagads Ltd

Description Books Closure; F.D 3.00 182-Day T-Bill Auction 91-Day T-Bill Auction Books Closure; F.D1.25

Source: NSE & Genghis Capital

Source: NSE & Genghis Capital

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Weekly Market Monitor - No. 45 Fixed Income: High Demand for the 91-Day T-bill… 

Money Markets: Data from the CBK indicated that the average interbank rate closed the week lower at 8.64%compared to 8.66% at the close of the previous week.

Primary Markets: The results of the 91-Day, 182-Day T-Bills and 364-Day T-Bills auctions for this week are shown below. The regulator intends to raise Kes.8Bn in the coming week as it auctions the 91 and 182-Day T-Bills. Table 11: Week 45 Auction Results

Weighted Avg. Rate Tenor Last 91 Day 10.237% 182 Day 10.854% 364 Day 10.337%

Latest 10.346% 10.923% 11.943%

Change (bps) 11.00 6.90 137.30

Subscription Rate 349%* 91 %* 63%*

Source: CBK, Genghis Capital

*absolute terms

Secondary Markets: Bond Turnover closed 51% lower with increased participation as 202 transactions occurred in the week compared to 182 last week. The IFBs accounted for 29% of the total turnover at Kes.2.605Bn in 89 trades. Specifically the IFB 1/2011/12Yr paper was dominant trading Kes.2.204Bn in 82deals; 25% of Total Bond Turnover. Table 7: Short -Term Interest Rates, Treasury Notes & CD’s Tenor 91 Day 182 Day 1 Year 2 Year 5 Year 10 Year

Kenya 10.35% 10.92% 11.94% 12.50% 11.86% 12.71%

Uganda 9.69% 14.68% 13.93% 14.84% 12.16% 15.28%

Tanzania 11.98% 13.13% 13.40% 14.53% 14.49% 14.20%

U.S 0.09% 0.14% 0.18% 0.30% 0.72% 1.71%

LIBOR (USD) 0.21% 0.31% 0.88% ----

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

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Weekly Market Monitor - No. 45 Table 13: Fixed Income Gross Cash-Flows for the Months of November and December:

Issue No. Govies

Cash Flow

Due Date*

Issued Amount

Coupon (%)

FXD 2/2006/6

C+P

19-Nov-2012

5,767.45

11.50%

6,099.08

FXD 1/2010/5

C

19-Nov-2012

11,924.85

6.951%

414.45

FXD 2/2006/10

C

19-Nov-2012

5,028.10

14.00%

351.97

FXD 1/ 2007/12

C

19-Nov-2012

4,864.20

13.00%

316.17

FXD 3/2007/15

C

19-Nov-2012

18,030.20

12.50%

1,126.89

FXD 4/2011/2

C

26-Nov-2012

10,500.00

22.844%

1,199.31

FXD 2/2010/5

C

26-Nov-2012

14,973.10

6.671%

499.43

FXD 1/2012/5

C

26-Nov-2012

4,905.55

11.855%

290.78

FXD 1/2011/20

C

26-Nov-2012

9,365.20

10.00%

468.26

FXD 2/2006/7

C

17-Dec-2012

2,317.95

12.00%

139.08

FXD 2/2007/15

C

17-Dec-2012

7,236.95

13.50%

488.49

FXD 1/2012/10

C

24-Dec-2012

445.60

12.705%

28.31

FXD 2/2010/25

C

24-Dec-2012

20,192.50

11.25%

1,135.83

FXD 4/2010/2

C

24-Dec-2012

8,946.20

4.586%

205.14

FXD 1/2011/1

C

24-Dec-2012

10,000.00

21.408%

1,070.40

FXD 2/2010/15

C

24-Dec-2012

7,329.35

9.00%

329.82

FXD 1/2008/20

C

24-Dec-2012

20,360.35

13.75%

1,399.77

Source: CBK, NSE, Genghis Capital Estimates

Gross - MM

C- Coupon, P â&#x20AC;&#x201C; Principal

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Weekly Market Monitor - No. 45

25

Evolution of the Yield Curve 06/01/2012 to 26/10/2012

20 15 10 5 0 1

3

5

7

9

11

13 6-Jan-12

15

17

19

21

23

25

27

29

26-Oct-12

NSE Yield Curve â&#x20AC;&#x201C; 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. 45 Currency KES Manages to Hold its Own… 

Performance: The KES was stable in the week thou it lost gains made last week on the KES/TZS losing -0.07%. On the other hand it gained on all major currencies with the largest gains were against the INR +1.48% and EUR/KES pair up 1.45%. The local currency continued to gain against the USD as the US fiscal cliff concerns were pushing the dollar lower with concerns that the US economy may be sent back to a recession when the $600Bn of tax rises and spending cuts begin in January. Bearish outlook on the EU economy and rising unemployment rates are exerting downward pressure on the Euro. Table 14: Spot & Select Forward Ask Rates

Week 44 85.50 137.12

Week 45 85.30 135.82

EUR/KES ZAR/KES KES/UGX KES/TZS INR/KES

109.94

108.35

8.28%

9.88 30.13

9.76 30.39

18.68% 3.11%

18.66 1.59

18.65 1.57

4.19% 7.76%

Source: CBK, Bloomberg, Genghis Capital Estimates

Annualized Volatility* 1.85% 3.84%

Pair/Cross USD/KES GBP/KES

Outright Forward Rates (Ask) 1M 2M 3M 6M 85.94 86.54 87.20 89.30 136.78 137.78 138.81 142.43 109.15 110.00 110.87 113.84 *5 Day Annualized

Technical Analysis and Outlook: The chart below shows the Know Sure Thing and Trading Envelope indicators on the USDKES currency pair over a one year period. They both signify an improvement in the volatility of the currency pair due to the tightening policy adopted by the government in 2011 extended in the current year.

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Weekly Market Monitor - No. 45 Commodities OPEC to Cut Supply in 2013â&#x20AC;Ś ď&#x201A;§

Oil/Fuel: In the just published OPEC report, the 12-member group cut its forecasts for crude oil demand in the next year with production decreasing in October. The group would need to produce 29.7Mn a day in 2013, 1.25Mn less than current production and 100,000 less than its estimates a month ago. The 0.2% decline in October was on the back of reduced production in Nigeria, Iran and Saudi Arabia. Brent Crude oil remains steady at USD106.95 despite this news.

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Weekly Market Monitor - No. 45

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Weekly Market Monitor - No. 45

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 Report By: 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 constitut e 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 ha s 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 14


Genghis Weekly Market Monitor Wk 45