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Recent Topicals

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Sub-Saharan Africa (SSA) Eurobonds: 2019 Performance

Jan 31, 2020

Africa’s appetite for foreign-denominated debt has increased in recent times with the latest issues in 2019 being South Africa, Ghana, Egypt, Benin and Kenya. Collectively, 2019 has seen the African continent as a whole raise USD 17.4 bn through the various Eurobond. The increased affinity for foreign currency-denominated debt continues to be attributed to: Financing of maturing debt obligations, The need to finance heavy infrastructure projects, Reduced financial aid to African countries by Western donor nations, and Covering for budget deficit This note analyses SSA’s Eurobond performance in the year 2019 with the aim of painting a picture of the investor confidence and risk tolerance, and an outlook on yield performance for the year 2020. The analysis will be broken down as follows: Background of Eurobonds in Sub Sahar...

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Is There a Real Estate Bubble in Kenya?

Jan 26, 2020

In 2017 we reviewed the real estate industry and prepared two topical pieces, Is There a Real Estate Bubble in Kenya? and What Real Estate Bubble?, addressing speculations that the property market was experiencing a bubble. According to the two topical reports, the Kenyan real estate market was still in its nascent stage and was just being institutionalized. The Kenyan market was thus, not experiencing a bubble but the normal real estate cycles of rising demand, peaking market, falling market then bottoming out. The rapid price increments witnessed were attributed to the real estate market being in the rising phase that was characterized by low supply and high demand leading to an increase in prices. This week, we revisit the topic by reviewing the current state of the market. It is evident that the...

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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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