Executive Summary

• Fixed Income: The Shilling touches a 3-year low of 93.5 against the dollar on the back of increased corporate activity and demand for the Dollar and, as expected in our last week's report, the Central Bank in a statement indicated that they will continue monitoring the currency and provide the necessary support;
• Equities: Equity markets recover from previous week's losses, with near-term performance dependent on corporate actions, such as dividend book closures, especially in the Banking sector;
• Private Equity: Kenya?s share of transaction value in Private Equity the highest in the region;
• Real Estate: The first listed REIT approaches, but roadblocks remain to determine their success;
• Focus of the Week: With increased disposable income in the economy, we highlight the reasons why individuals should strive to save and give the steps to effectively create a savings plan.

Fixed Income

Equities

Private Equity

Real Estate

Focus of the Week ? Why and how do I save and how do I Invest my savings?

1. Make a budget: A budget is an estimate of the incomes and expenses for a set period and is a key tenet to proper financial planning. Since budgeting allows you to create a spending plan for your money, a budget is a way of being intentional about the way you spend and save your money. Not only does a budget give you control over your money, but it also saves you the stress of suddenly having to adjust to lack of funds because you did not initially plan how to spend them. Additionally, a budget also aids in deciding which short term expenditure to sacrifice in order to enjoy long term benefits like a holiday or comfortable retirement;
2. Pay yourself first: Saving should not be viewed as what is left after current needs and wants have been satisfied. "Pay yourself first" is an effective savings strategy that can help individuals choose saving over spending money. It entails first saving a portion of the money earned, say 10-20% of net income, before spending on consumption;
3. Set goals that will inspire success: To successfully practice the ?pay yourself first? strategy, a person should set personal goals. Saving becomes easier if you set a clear goal because that way, rather than thinking about the money you are setting aside each month, you can focus on what you will be able to do once you?ve reached your goal;
4. Do not take unnecessary risk: It is important to know the risks inherent in all the savings products or channels before committing your money. Ideally, savings should be invested in in the highest returning assets, on a risk-adjusted basis;
5. Put time to work for you: The concept of time value of money is one that everyone should learn about and live by, since it can give financial security that one may otherwise not have. The more time that an individual has to save and invest, the more they can end up with in the long run since money invested is compounded so that even small amounts invested regularly can add up to impressive sums in the long run;
6. Diversify: Never put all your eggs in one basket. Spread your money between different kinds of savings products to help reduce the overall risk of your savings. The need to diversify is essential because no investment product performs well all the time; when one type of investment is down another tends to be up.

Where Can Money Be Saved?

1. Deposit Accounts: These are accounts held by banks and earn interest on the amounts deposited. They can either be savings or fixed deposit accounts. Their risk profile is low since the returns are guaranteed which ensures safety of one?s funds but there?s a downside in that your money?s buying power is eroded over time if inflation is higher than the interest rates paid, which is the typical situation given the rates offered by most banks.
2. Financial Markets Instruments: This refers to the investment in shares of quoted companies at the NSE or investment in fixed income securities such as Treasury bills and bonds. Stocks are suitable for long-term investors due to the volatile nature of the market and since the returns are not guaranteed, stocks have a higher risk profile. Fixed income securities on the other hand are suitable for short to medium-term investors and are not as volatile as stocks. Fixed income securities offer issuer-guaranteed returns hence have a lower risk profile.
3. Collective Investment Schemes (Pooled funds): This is an investment vehicle made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments, Property, Private equity and similar assets. Such schemes include unit trusts, mutual funds.
4. Structured / Private Solutions: These are usually saving solutions such as Structured Notes and Cash Management Solution (?CMS?), which are packaged by investment professionals, typically tailor made for the investor, to enable investors access pockets of returns in the market that are not readily accessible through traditional investment avenues such as stocks, bonds and bank deposits. Structured products are relatively more complex, but they also offer higher returns relative to traditional products.