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Recent Topicals

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Cytonn Note on the Monetary Policy Committee (MPC) Meeting for January 2020

Jan 22, 2020

The Monetary Policy Committee (MPC) is set to meet on Monday, 27th January 2020, to review the outcome of its previous policy decisions and recent economic developments, and to make a decision on the direction of the Central Bank Rate (CBR). In their previous meeting held on 25th November 2019, the MPC lowered the CBR by 50 bps to 8.5% from 9.0%, citing that the economy was operating below its potential level concluding that there was room for accommodative monetary policy to support economic activity. This was in line with our expectations as per our MPC Note, with our view being informed by: The need to stimulate growth, with GDP growth in 2019 having slowed down averaging 5.6% in H1’2019 lower than 6.4% in H1’2018 and below the CBK’s estimated growth at 6.3%. With the plans of the continued fiscal consolidation by the Government,...

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Capital Markets Based Home Ownership Savings Plans

Jan 19, 2020

This week we revisit the Home Ownership Savings Plan, HOSP, topic in light of the Finance Act 2019, which expanded the scope of approved institutions that can hold savings towards HOSP to include Fund Managers and Investment Banks registered under the Capital Markets Act; the expansion was through the amendment of the Income Tax Act. Before the amendment, only banks savings qualified for HOSP. We review the prevailing housing market conditions that led up to the government’s declaration of affordable housing as part of the Big 4 Agenda and the effect of recent government incentives in promoting affordability. We also look at features of the Cytonn Affordable Housing Investment Plan, an investment plan that will enable Kenyans to build a deposit towards their affordable housing ownership; CAHIP is a collaboration between Cytonn Investment, as the structuring agent, and Cytonn Asset Managers Limited, as the Fund Manager eligible to take HOSP savings. As such, we shall lo...

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Kenya Macro Economic Review

Jan 5, 2020

Economic Growth: The country's Gross Domestic Product (GDP), adjusted for inflation, was subdued in 2019 having expanded by 5.6%, 5.6% and 5.1% in Q1’2019, Q2’2019, and Q3’2019, respectively, to record an average growth of 5.4% compared to 5.7%, 6.3%, and 6.0% in Q1’2018, Q2’2018 and Q3’2018, respectively, and averaging at 6.0%. The slower growth was as a result of: A slowdown in agricultural activities, which saw the sector record an average growth of 4.2% for the first 3 quarters of 2019, representing a 1.1% point decline from the 5.3% recorded in the same period of review in 2018. The slowdown in agriculture was as a result of delayed long rains, which curtailed agricultural production. In terms of sectoral contribution, agriculture remained the highest contributor averaging 22.6% over the same period, and, Decreased output in transport and electricity activ...

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Sub-Saharan Africa Region Review

Jan 5, 2020

According to World Bank’s latest African Pulse Issue, Sub-Saharan Africa’s economic performance remained sluggish in 2019 with the preliminary projections indicating that the region grew marginally by 2.6% in 2019 from 2.5% in 2018. The growth was hampered by a challenging external environment, which saw the softening of global growth, falling commodity prices, increased trade tensions leading to heightened uncertainty, and subdued agricultural production partly due to drought in various countries in the region, coupled with security concerns, which affected production in some countries.  Currency Performance Regional currencies were relatively volatile in 2019, whi...

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Global Markets Review

Jan 5, 2020

The year 2019 was characterized by a slow-down in global growth, which was weighed down by the negative effects of the trade conflicts among the major economies. These include: An on-going trade dispute between the US and China, Uncertainty in Britain over its exit from the European Union (“Brexit”), Geopolitical tension between the US and Iran, disrupting the mid-stream and down-stream oil supply channel, and, Overall slowing global trade, which, according to the World Trade Organization, is forecasted to grow by 1.2% in 2019. According to IMF, global GDP growth in 2019 is expected to come in at 3.0%, a 0.3% point downgrade from their initial projection from the April 2019 World Economic Outlook, and lower than the 5-year average of 3.5%. The IMF downgraded their expec...

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