Genghis Weekly Strategy - 22nd October 2019

Equities

• BUY KCB at levels of KES 42.00, representing a 48.9% upside potential from our KES 62.52 target price. Following the President’s refusal to assent to the Finance Bill 2019, and as per our expectation in the , we assert that the rate caps will not be maintained. Consequently, banking counters are expected to gradually rise over the coming weeks, factoring in a 2 week recess period in Parliament, as the Finance Bill 2019 is deliberated upon. We recommend our top pick, KCB Group, as the attractive entry points may not sustain heading towards the close of the month.

Fixed Income

• BUY IFB1/2019/16 at 11.80% - 12.20%. The uncertainty brought about by the President’s refusal to assent to the Finance Bill 2019, coupled with increased odds for a possibility of a rate cap repeal, will heighten aggressive bidding of the infrastructure bond paper. The implied yield for a 16-year tenor is currently at circa 12.5% level and a similar tax-free tenor would yield an estimated 11.25%. With market sentiment tilted to an upward shift on the yield curve, we expect the accepted weighted rate to average 11.80% - 12.20%.