Quarterly Market Performance Summary – Q1 2025
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Equities Market
The stock market started on a high note reflecting improved valuations and increased market activity in quarter on of 2024 supported by the ongoing interest rate cuts as high inflations appeared to have contained right from the second half of 2024. The gains however are likely to be short lived on impacts from the ongoing global trade wars fronted by the US by way of elevated tariffs.
Local stocks activity rallied up in Q1 2025 supported by anticipation of better earnings from full year 2024 (FY2024) results announced in March 2025 in relation to Q1 2024. This saw prices surge up 15.7% year on year (y-y) as measured by the Nairobi All-Share Index (NASI) which gathered 17.72 points from 113.09 points by end of March 2024 to 130.81 points by closure of Q1 2025.
Quarter on quarter (Q-Q) however, prices lost 1.0% on average while activities sunk 36.0%. NSE 20 lost the most at 3.2% followed by NSE 10 and NSE 20 with 1.8% and 1.7% losses respectively. Total turnovers for the quarter stood at KES 25.90Bn, a 40.0% y-y rise compared to that of KE 18.51Bn exchanged similar period in Q1 2024, strongly supported by improved activities in the banking and the telecommunication sectors which controlled 49.9% and 30.6% respectively, accounting for 80.5% of the quarter’s turnovers.
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Foreign participation further edged down to an average of 38.7% in Q1 2025 with a 128.7% jump in net foreign outflows compared to an average of 59.2% in Q1 2024 of KES 2.23Bn net foreign outflows recorded in Q1 2024. Q-Q, foreign activity remained relatively stable from 38.8% in Q4 2024 to 38.7% in Q4 2025.
Safaricom retained the quarter’s top mover position after changing hands 444.60Mn shares valued at KES 8,035.73Mn supported by heavy foreign exits. The telco recorded KES 1,364.35Mn net foreign outflows after its foreign sales transactions hit KES 6,254.65Mn or 77.8% of all its sales compared to KES 4,890.30Mn or 60.9% of all its buys transactions.
The giant telco’s price however gained 3.3% y-y from KES 17.75 on 31st March 2024 to KES 18.30 per share supported by its local subsidiary (Safaricom Kenya), albeit still held low by its Ethiopia Subsidiary losses. KCB Group, Equity Group and Absa Bank (K) took second, third and fifth positions supported by their KES 1.50, KES 1.55 and KES 4.25 respective final dividends declared March 2025.
This is despite KCB Group’s dividends being quite low against market expectations in spite of an impressive financial results in which the net profits accelerated up 64.9% y-y from KES 37.46Bn to KES 61.77Bn In the second quarter of 2024, we expect heavy sale offs as investors keenly monitor the market for better exits points before and after the respective dividend book closures. This will further be accelerated by panic sales sentiment reactions to the United States’ trade tariff stand-off with the rest of the world.
Ongoing Corporate Actions
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Bonds Market Performance
Bonds turnover improved by nearly half year on year in Q1 2025 to KES 671.69Bn from that of KES 459.09BN exchanged in Q1 2024. This was mainly supported by quick moves by investors to lock in investments before the interest rates drop further. Normal fixed papers were the most traded papers, transacting KES 400.20Bn, representing 59.6% of the entire market value traded. This was as infrastructure papers became more expensive in the secondary market on elevate demand.
In the primary market trading auctions, a total of KES 299.91Bn was subscribed against a government target of KES 125.00Bn while KES 214.54Bn being accepted to account for a 171.6% performance, against target. This was against a total payouts of KES 176.17Bn with KES 27.69Bn being maturities payments for FXD1/2010/015 that matured in March.
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Yield Curve
The yield curve further shifted down in the quarter influenced by the ongoing interest rate cuts transmissions in the market. The gap widened on what we view as the deliberate intervention by the Central Bank to ensure lending rates are lowered. Re-opening of existing bonds with lower coupons added to the pressure of narrowing down general yields, leaving investors with no option other than taking up the lower rates. This saw investors investing via secondary market pay dearly as existing bond holders smile.
Overall, we expect the yield curve to maintain a downward shift supported by the keen attention of the regulator to see interest rates narrow down.
Interbank
The interbank closed the quarter slightly below the Central Bank Rate (CBR) at 10.68% as guided by the policy of tracking the CBR at CBR±250.0bps instituted in August 2024. As a result average interbank rate went down 307.2bps despite the strained liquidity mopped by the government through primary auctions. Liquidity demand however, remained low in the quarter to average at KES 19.21Bn compared to KES 23.84Bn traded in Q1-2024.
This further supported in lowering the interbank rate to below the CBR. Bank excess liquidity also declined down to KES 16.0Bn by end of the quarter while averaging at KES 20.4Bn compared to KES 18.3Bn of 31st March 2024. This is despite the reduced cash reserve ratio (CRR) creating more liquidity for banks.
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Treasury Bills
T-bills market witnessed heavy oversubscriptions despite the papers’ returns dropping sharply in the quarter. A total of KES 430.98Bn was subscribed at an 85.1% acceptance of KES 366.81Bn. This represents a 117.6% performance against a quarterly target of KES 312.00Bn.
The performance was mainly supported by re-investments from the KES 322.36Bn that matured in Q1 2025 and some new investments from banks after their returns dropped drastically. Returns on the 91-day paper dropped faster at 794.0bps y-y from 16.9137% by end of March 2024 to close Q1 2025 at 9.0583%. The 182- and 364-day paper followed suit with losses of 785.5bps and 657.7bps respectively.
Qurter on quarter the rates declined quite gradually, see above page. In Q2 2025, we expect T-bill maturities of KES 369.54Bn most of which we expect to be re-invested back and support oversubscriptions. The target for the new quarter stands at KES 312.00Bn.
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Currency
The local Kenyan shilling remained stable in the quarter to gain 1.9% against the US dollar, 2.2% against the Euro and 1.6% against the Japanese yen by mend of Q1 2025. This was mainly backed by muted demand for the major foreign currencies especially the US dollar after the government secured a USD 1.50Bn Eurobond in early March which bolstered the forex reserves and the shilling.
On 3rd March 2025, Kenya raised USD 1.5Bn from an 11-year amortized Eurobond will be repaid in 3-equal instalments in 2024, 2035 and 2036. A total of USD 900MN from the issue was used to clear the USD 900 Eurobond that was to mature on 22nd May 2027 while part of the remaining amount was to clear some expensive concessional facilities. The paper’s coupon was priced at 9.5%. Forex reserves improved 40.2% year on year from USD 7,088Mn in Q1 2024 to USD 9,936Mn by end of Q1 2025 strongly supported by above forex inflows, diaspora remittances and receipts from agricultural exports.
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