Bloomberg: GNCP <GO>

www.genghis-capital.com

Weekly Market Monitor - No. 01

Weekly Market Monitor - No. 39/2012

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: Liquidity Boosts NSE Fixed Income: Uptick in Yields to Sustain Currency: KES Defies End Month Pressure Commodities: Brent Crude Up 15% in Q3 3 8 10 11

Weekly Market Monitor - No. 39

Executive Summary Themes: Momentum Building, Yield Upturn, Transmission of Global Uncertainty & Risks... Equities: Liquidity Boosts NSE There was an even performance between the accumulation and distribution activities this week as the NSE 20 share jumped 44.59 points to 3972. The other indices closed north with the NASI up 0.97 points, the FTSE 15 and 25 closed 0.79% and 0.83% higher. Foreign investors accounted 64% of the total equity turnover sustaining their long stance with a net inflow of Kes.308Mn. Equity turnover more than doubled to Kes.2.3Bn buoyed by the increased participation from both sets of investors. Market Capitalisation was stable at Kes.1.15Tn. Fixed Income: Uptick in Yields to Sustain The 91-Day paper was massively undersubscribed at 31% with the 182Day T-Bill faring better at 92% subscription. This regulator intends to raise Kes.14Bn this week as it auctions the 91, 182 and 364-Day T-Bills. Currency: KES Defies End Month Pressure The KES was stable in the week supported by tea export inflows and liquidity mop ups. The national currency largest gain was in the USD/KES pair +0.97% with further gains achieved in the KES/UGX pair +0.10% and KES/EUR +0.08%. The largest slip was recorded in the INR/KES pair -4.36% with the sentiment echoed in the GBP/KES pair down 1.98%. Commodities: Brent Crude Up 15% in Q3 Oil prices closed higher in Q3 buoyed by the maintenance related curbs to the North sea output, Middle East turmoil and Irans on-going dispute with the west. Further boost was provided by the measures taken up by the US, Japanese and European central banks to boost economic growth in the regions and by extension globally. The Israeli-Iran tension also aided in increasing oil prices.

Weekly Market Monitor - No. 39

Equities: Liquidity Boosts the NSE There was an even performance between the accumulation and distribution activities this week as the NSE 20 share jumped 44.59 points to 3972. The other indices closed north with the NASI up 0.97 points, the FTSE 15 and 25 closed 0.79% and 0.83% higher. Foreign investors accounted 64% of the total equity turnover sustaining their long stance with a net inflow of Kes.308Mn. Equity turnover more than doubled to Kes.2.3Bn buoyed by the increased participation from both sets of investors. Market Capitalisation was stable at Kes.1.15Tn. "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 weeks trading highlights are summarized below: Table 1: NSE Performance Table 2: NSE Index Performance, Turnover

NSE 20 Share Index, Equity Turnover

4,800 4,600 4,400 4,200 4,000 3,800 3,600 3,400 3,200 3,000 1,930,000,000 1,730,000,000 1,530,000,000 1,330,000,000 1,130,000,000 930,000,000 730,000,000 530,000,000 330,000,000

2,800 130,000,000 3-Jan-11 3-Mar-113-May-11 3-Jul-11 3-Sep-11 3-Nov-11 3-Jan-12 3-Mar-123-May-12 3-Jul-12 3-Sep-12

Equity Turnover

NSE 20 Share Index

Chart 2: Captures the trend of the Nairobi Stock Exchange NSE 20 Share Index vs. Equity Turnover. The NSE 20 Share Index has been on a trading range unable to breach its resistance level of 4,000 points.

Weekly Market Monitor - No. 39

Table 3: NSE Performance

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

Source: NSE, Genghis Capital

Week 38 1,143.15 521.77 21,113.50

Week 39 1,155.99 2,348.64 16,814.70

% Change 1.12% 350.13% -20.36%

Our weekly segmental analysis (Table 4) shows an improvement from last week with six sectors gaining value versus four sectors losing. The market as a whole soared 0.54% with these developments. The Automobiles & Accessories segment was the best performing segment this week gaining 3.43%. This performance was largely up due to Marshalls E.A Ltd (NSE: MASH) gaining 8.33% to VWAP Kes.13.00. The Insurance segment was at the bottom declining by 0.86%. Kenya Reinsurance Corporation Ltd (NSE: KNRE) was down 2.49% to close at Kes.11.75.

NSE Segment Performance

Table 4: Weekly Segmental Price Performance Analysis

Source: NSE & Genghis Capital

Weekly Market Monitor - No. 39

NSE P/E Analysis Three sectors moved into value territory in the week. The Advance/Decline ratio was relatively even at 24/22 explaining the relative flat performance in the overall market. The accumulation activities slightly edged distribution activities informing the slight slip in value of the overall market at 10.04.

Table 5: NSE P/E Analysis

Sector Agricultural Automobiles & Accessories Banking Commercial & Services Construction & Allied Energy & Petroleum Insurance Investment Manufacturing & Allied Telecommunication & Technology Main Market P/E
Source: NSE

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

Sector P/E Sector P/E Week 38 3.64 NM 8.22 8.69 12.30 7.77 11.20 10.07 14.55 12.47 10.01 Week 39 3.67 NM 8.21 8.79 12.48 7.25 11.09 10.20 15.02 12.78 10.04

% Change 0.82% NM -0.12% 1.15% 1.46% -6.69% -0.98% 1.29% 3.23% 2.49% 0.30%

Foreign Investor Activity Total foreign investor equity turnover as a percentage of the total NSE turnover increased to 63.52% this week compared to 53.08% at the close of the previous week. Total net inflows at the end of the week stood at Kes.308Mn compared to Kes.142.4Mn last week.

Table 6: Weekly Foreign Equity Turnover Summary (Fig in KES)

Day Mon Tue Wed Thur Fri TOTAL Buy 106,464,105.00 396,502,217.50 62,590,440.00 174,540,777.50 160,105,067.50 900,202,607.50 Sell 21,806,612.50 364,295,275.00 59,251,237.50 67,561,137.50 79,262,540.00 592,176,802.50 Net Inflows (Outflows) 84,657,492.50 32,206,942.50 3,339,202.50 106,979,640.00 80,842,527.50 308,025,805.00 Total NSE Turnover 314,383,688.00 884,483,322.00 285,987,959.00 476,907,708.00 387,748,462.00 2,349,511,139.00 Foreign T/O (% of Total NSE (T/O) 40.80% 86.02% 42.60% 50.76% 61.73% 63.52%

Source: NSE & Genghis Capital Dealers

Foreign Turnover on the top 5 traded counters accounted for 64% of the total weekly foreign investor activity at the close of Week 37 compared to 46% in Week 36. The purchase activity on these counters accounted for 90% of the total foreign buying activity on the NSE this week. The most actively bought counter was East African Breweries Ltd (NSE: EABL).

Weekly Market Monitor - No. 39

Table 7: Top 5 Foreign Traded Counters - Week 39 (Fig in KES)

Equity East African Breweries Ltd Equity Bank Ltd Safaricom Ltd Kenya Commercial Bank Ltd British American Tobacco Ltd TOTAL
Source: NSE & Genghis Capital Dealers

Buy 464,117,150.00 94,126,387.50 69,953,492.50 85,206,075.00 96,023,550.00 809,426,655.00

Sell 391,556,200.00 89,037,012.50 45,212,530.00 25,481,087.50 10,027,450.00 561,314,280.00

Net Inflows (Outflows) 72,560,950.00 5,089,375.00 24,740,962.50 59,724,987.50 85,996,100.00 248,112,375.00

Total Weekly Turnover 855,673,350.00 183,163,400.00 115,166,022.50 110,687,162.50 106,051,000.00 1,370,740,935.00

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 Equity Bank Limited 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 Housing Finance Ltd Scangroup Ltd Portfolio Return Source: NSE & Genghis Capital

Price at 12 Month Recommendation Target Price 14.55 15.80 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 13.65 49.25 19.55 19.90 16.90 45.50 14.55 198.50 123.40 27.10 17.25 22.00 197.70 6.25 201.00 18.50 15.35 16.25 186.00 27.00 59.60

Current Price 12.05 23.25 15.10 34.00 10.60 220.00 111.00 27.50 17.85 17.55 213.00 6.35 171.00 11.90 11.75 8.85 165.00 14.10 58.00

Upside Potential 38.36% -16.83% 10.65% 25.27% 27.15% -10.83% 10.05% -1.48% -3.48% 20.23% -7.74% -1.60% 14.93% 35.68% 23.45% 45.54% 11.29% 47.78% 2.68%

Return to Date -17.18% 47.15% 54.08% 28.30% -10.17% 41.03% 25.42% 48.65% 147.92% 10.73% 39.22% 58.75% 1.79% 3.03% 16.92% 6.63% 1.23% 3.30% 17.77% 27.61%

Recommendation

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

Weekly Market Monitor - No. 39

Genghis Index:
Table 9: Genghis Index Performance Large-Cap Index The index closed 1.18% higher in terms of price performance with market capitalization following suit to Kes. 995Bn. Mumias Sugar Co. Ltd (NSE: MSC) was the segments best performing counter +5.74% - VWAP Kes.6.45. CfC Stanbic Holdings of Kenya Ltd (NSE: CFC) closed 6.43% lower at VWAP 40.00.

Mid-Cap Index Price performance shed 0.18% this week with market capitalization down to Kes.141Bn. Standard Group Ltd (NSE: SGL) was the segments best performer up 6.25% - VWAP Kes.25.50. Sasini Ltd (NSE: SASN) was the sectors worst performing stock shedding 3.95% to close with a VWAP of Kes.10.95.

Small-Cap Index Marshalls E.A Ltd (NSE: MASH) was the segments best performer advancing 8.33% to VWAP Kes.13.00. Unga Ltd (NSE: UNGA) was the worst performing stock 8.33% VWAP Kes.13.75.

Table 10: Investors Diary

Date 3rd October 3rd October 4th October 5th October 5th October 5th October 5th October

Firm/Body CBK CBK CBK BOC EGAD BBK TCL

Description 182-Day T-Bill 364-Day T-Bill 91-Day T-Bill Payment: Interim Dividend Kes.2.00 Books Closure: Bonus Ratio 1:1 Payment: Interim Dividend Kes.0.30 Payment: Final Dividend Kes.0.25

Source: NSE & Genghis Capital

Weekly Market Monitor - No. 39

Fixed Income: Uptick in Yields to Sustain Money Markets: Data from the CBK indicated that the average interbank rate closed the week higher at 8.3121% compared to 7.0595% at the close of the previous week. Primary Markets: The results of the 91 & 182-Day T-Bill auctions for this week are shown below. The 91-Day paper was massively undersubscribed at 31% with the 182-Day T-Bill faring better at 92% subscription. This regulator intends to raise Kes.14Bn this week as it auctions the 91, 182 and 364-Day T-Bills.
Table 11: Week 39 Auction Results

Weighted Avg. Rate Tenor Last 91 Day 7.647% 182 Day 9.265%
Source: CBK, Genghis Capital

Latest 8.093% 9.888%

Change (bps) 44.60 62.30

Subscription Rate 31%* 92%*

*absolute terms

Secondary Markets: Decreased activity in the bond market down 20.36% in the week to Kes.16.81Bn in turnover from last weeks close of Kes21.11Bn. The 15-Yr bonds accounted for 59% of the total turnover at Kes.9.94Bn.

Table 7: Short -Term Interest Rates, Treasury Notes & CDs

Tenor 91 Day 182 Day 1 Year 2 Year 5 Year 10 Year

Kenya 8.09% 9.89% 10.34% 11.11% 11.86% 12.71%

Uganda 10.02% 12.43% 12.01% 14.84% 15.39% 15.28%

Tanzania 12.45% 13.01% 13.76% 13.81% 14.49% 14.99%

U.S 0.10% 0.11% 0.18% 0.27% 0.68% 1.68%

LIBOR (USD) 0.41% 0.70% 1.03% ----

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

Weekly Market Monitor - No. 39

Table 13: Fixed Income Gross Cash-Flows for the Month of October:

Issue No. Govies FXD 1/2006/9 FXD 1/2007/10 FXD 1/2009/10 FXD 1/2010/10 FXD 1/2009/15 FXD 1/2007/6 FXD 2/2008/5 FXD 2/2011/2 FXD 4/2008/5 FXD 1/2012/2 FXD 2/2010/10

Cash Flow C C C C C C C C C C C

Due Date* 15-Oct-2012 22-Oct-2012 22-Oct-2012 22-Oct-2012 22-Oct-2012 22-Oct-2012 22-Oct-2012 22-Oct-2012 22-Oct-2012 29-Oct-2012 29-Oct-2012

Issued Amount 3,060.25 9,308.80 4,966.85 5,895.64 9,420.45 5,948.00 4,095.80 6,695.71 10,007.50 6,468.62 14,462.47

Coupon (%) 13.50% 10.75% 10.75% 10.75% 12.50% 11.50% 9.50% 7.439% 9.50% 13.826% 9.307%

Gross - MM 206.57 500.35 266.97 316.89 588.78 342.01 194.55 249.05 475.36 447.18 673.01

Source: CBK, NSE, Genghis Capital Estimates

C- Coupon, P Principal

25

Evolution of the Yield Curve 13/01/2012 to 31/08/2012

20

15

10

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 6-Jan-12 31-Aug-12

NSE Yield Curve 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.

Weekly Market Monitor - No. 39

Currency KES Defies End Month Pressure Performance: The KES was stable in the week supported by tea export inflows and liquidity mop ups. The national currency largest gain was in the USD/KES pair +0.97% with further gains achieved in the KES/UGX pair +0.10% and KES/EUR +0.08%. The largest slip was recorded in the INR/KES pair -4.36% with the sentiment echoed in the GBP/KES pair down 1.98%. A drop in yield next week following the decrease in inflation could exert downward pressure on the shilling.
Table 14: Spot & Select Forward Ask Rates

Outright Forward Rates (Ask)

Pair/Cross USD/KES GBP/KES EUR/KES ZAR/KES KES/UGX KES/TZS INR/KES Week 38 84.83 137.94 110.24 10.25 29.77 18.59 1.55 Week 39 84.01 140.67 110.15 10.38 29.80 18.45 1.61 Annualized Volatility* 14.38% 16.87% 10.81% 12.77% 9.59% 15.03% 27.48% 1M 84.57 141.67 110.99 2M 85.19 142.32 111.55 3M 85.77 143.68 112.69 6M 88.04 147.70 116.05 -

Source: CBK, Bloomberg, Genghis Capital Estimates

*5 Day Annualized

Technical Analysis and Outlook: The Ichimoku chart below outlines the 1-Yr performance of the EURKES currency pair. In majority of the period, the conversion line was below the Base line thus the huge pressure on the EUR. The conversion line recently broke the Base line from below indicating strengthening of the EUR against the KES.

10

Weekly Market Monitor - No. 39

Commodities Brent Oil Prices up 15% in Q3 Oil/Fuel: Oil prices closed higher in Q3 buoyed by the maintenance related curbs to the North sea output, Middle East turmoil and Irans on-going dispute with the west. Further boost was provided by the measures taken up by the US, Japanese and European central banks to boost economic growth in the regions and by extension globally. The Israeli-Iran tension also aided in increasing oil prices. Brent Crude closed at USD112.39 on Friday and increased tension in Spain will boost oil prices even further in the coming week.

11

Weekly Market Monitor - No. 39

12

Weekly Market Monitor - No. 39

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 Anthony Kimani, Research Analyst | Tel:+254 20 2774781 | Email: akimani@genghis-capital.com Kelvin Nyabando, Research Analyst | Tel:+25420 2774781 | Email: knyabando@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 constitute 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 has 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

13