{{ text }}

3 April, 2023
Press Release





In Q1’2023, there was a deterioration in the general business environment in the private sector as evidenced by the average Purchasing Managers’ Index (PMI) for the first two months of Q1’2023 coming at 49.3, compared to 51.7 recorded during a similar period in 2022. Despite the deterioration in the business environment, the government collected Kshs 293.4 bn in the first two months of Q1’2023, higher than Kshs 266.5 bn collected in the same period last year. The revenue performance in the first two months of Q1’2023 represented 22.9% of the total revenue collected of Kshs 1,281.3 bn in the first eight months of the FY’2022/2023 and 89.7% of the prorated estimates of Kshs 1,427.7 bn, an indication of tough macroeconomic environment in the country occasioned by elevated inflationary pressures. Notably, March 2023 inflation rate came at 9.2%, similar to what was recorded in February 2023, and 1.7% points above the CBK target range of 2.5%-7.5%.

The Kenyan Economy is projected to grow at an average rate of 5.3% in 2023, with Cytonn Investments projecting a 5.0% growth from an average estimate of 5.3% in 2022. “The sustained inflationary pressures, erratic weather patterns, and the elevated global risks pose threat to domestic economic growth. However, we expect the growth will be aided by a rebound in the agricultural sector, as long rains are expected in the coming months.” Said Samuel Ochieng, an Investment Analyst at Cytonn.

Cytonn Report: Kenya GDP Growth Forecast



2022 Estimates

2023 Projections

International Monetary Fund



National Treasury



World Bank



Fitch Solutions



Cytonn Investments Management PLC

















Source: Cytonn Research


The returns by the various asset classes remained relatively stable in Q1’2023 except for the equities market, with NASI recording an 11.5% decline from a 0.7% decline recorded in Q4’2022. The 364-day, 182-day and 91-day Government papers recorded average yields of 10.6%, 10.1% and 9.6% in Q1’2023, from 10.1%, 9.7% and 9.6% in Q4’2022, respectively, while average Real Estate rental yields came in at 7.1% an increase from 7.0% recorded in Q4’2022. The average returns of the top five Money Market Funds recorded a 1.4% points increase to 10.8% in March 2023, from 9.4% recorded in December 2022. The chart below summarizes the performance of various asset classes in Q1’2023:



Money Market Funds continued to offer better returns than most asset classes in Q1’2023. Money Market Funds offer a good safe haven for investors who wish to switch from a higher risk portfolio to a low-risk portfolio, especially in times of uncertainty. During the period under review, the average yield for the Cytonn Money Market Fund (CMMF) increased by 0.2% points to 10.8% in Q1’2023 from 10.6% in Q1’2022. NASI was the only decliner amongst the asset classes declining by 10.8% points to a decline of 11.5%, from a decline of 0.7% in Q4’2022, driven by losses recorded by large caps such as Safaricom, Bamburi, KCB Group, and NCBA Group of 25.1%, 11.0%, 6.8% and 6.7%, respectively.


FIXED INCOME REVIEW: In Q1’2023, there was a relatively high demand for Treasury-bills auctions as the overall subscription rate came in at 135.8%, up from the 108.5% subscription rate recorded in Q4’2022. The oversubscription was despite tightened liquidity in the money market during the quarter, with the average interbank rate increasing to 6.5%, from 5.1% in Q4’2022. Investor’s preference for the shorter 91-day paper persisted as they sought to avoid duration risk, with the paper receiving bids worth Kshs 217.8 bn against the offered Kshs 48.0 bn, translating to an oversubscription rate of 453.5%, higher than 364.9% recorded the previous quarter. Notably, the yields on all the papers were on an upward trajectory with the average yields on the 364-day, 182-day and the 91-day papers increasing by 48.3 bps, 34.2 bps and 41.8 bps to 10.6%, 10.1% and 9.6%, respectively.

The projected budget deficit of 5.7% is relatively ambitious given the downside risks and deteriorating business environment occasioned by high inflationary pressures. Further, revenue collections are also lagging behind with high debt service-to-revenue ratio. Therefore, we expect a continued upward readjustment of the yield curve in the short and medium term, with the government looking to bridge the fiscal deficit through the domestic market. Owing to this, our view is that investors should be biased towards ‘short-term’ fixed-income securities to reduce duration risk.” said Aura Christopher, an Investment Analyst at Cytonn Investments.

EQUITIES REVIEW: During Q1’2023, the equities market was on a downward trajectory, with NASI, NSE 20 and NSE 25 declining by 11.5%, 3.2% and 5.4%, respectively. The equities market performance during the quarter was driven by losses recorded by large caps such as Safaricom, Bamburi, KCB Group, and NCBA Group of 25.1%, 11.0%, 6.8% and 6.7%, respectively. The losses were, however, mitigated by gains recorded by banking stocks such as Standard Chartered Bank (SCBK), Co-operative Bank, ABSA Bank and NCBA Group of 19.1%, 6.9%, 4.1% and 2.5%, respectively.

We are “Neutral” on the Equities markets in the short term due to the current adverse operating environment and huge foreign investor outflows and “Bullish” in the long term due to current cheap valuations and expected global and local economic recovery. With the market currently trading at a discount to its future growth (PEG Ratio at 0.7x), we believe that investors should reposition towards value stocks with strong earnings growth and that are trading at discounts to their intrinsic value. We expect the current high foreign investors sell-offs to continue weighing down the equities outlook in the short term.” said Kevin Karobia, Lead Investments Analyst at Cytonn Investments.

REAL ESTATE REVIEW: In Q1’2023, the Real Estate sector recorded notable growth in terms of activity compared to a similar period in 2022, attributable to the continued growth of the Kenyan economy enabling increased Real Estate property transactions. The performance was also shaped by the continued focus on the Affordable Housing Program (AHP) by both the government and the private sector and expansion efforts by local and international retailers. Additionally, positive demographics evidenced by Kenya’s relatively high urbanization and population growth rates of 3.7% p.a and 1.9% p.a, respectively, against the global average of 1.6% p.a and 0.9% p.a, respectively, as at 2021, driving increased demand for developments.

In the Nairobi Metropolitan Area (NMA), the residential sector recorded improved performance with an increase in average total returns to 6.1% from the 5.7% recorded in Q1’2022. The commercial office sector recorded average rental yields of 7.6% in Q1’2023, from 7.3% recorded in Q1’2022, while the retail market recorded average rental yields of 8.0%, from 7.9% in a similar period in 2022. The land sector recorded an average annualized capital appreciation of 5.7% in Q1’2023, with un-serviced land prices in satellite towns realizing the highest capital appreciation at 14.2% y/y.

The outlook of the real estate sector is positive for one sector-land, neutral for five Sectors-Residential, Commercial Office, Retail, and Hospitality and negative for one sector-Listed Real Estate. Therefore, our overall outlook for the real estate sector is ‘NEUTRAL,’ supported by; positive demographics, improving infrastructure, continued focus on the affordable housing front, and improved access to mortgages.” Said Kennedy Waweru, a Real Estate Research Analyst at Cytonn Investments. “The performance of the sector is likely to be constrained by the existing oversupply in the commercial office font and the retail sector, reduced consumer purchasing power brought about by the tough economic environment and subdued performance of the REIT investment asset class,” added Kennedy.

For more details, see the report.

Notes to the Editor:

Cytonn Investments is an independent investment management firm with offices in Nairobi - Kenya, and D.C. Metro - U.S. We are primarily focused on offering alternative investment solutions to Individual High-Net-Worth Investors, Global and Local Institutional Investors and Kenyans in the diaspora interested in the high-growth East-African region. We currently have over Kshs 82.0 billion of investments and projects under mandate, primarily in real estate.

For more information, kindly contact:

Clifford M. Mulama

Brand and Communications

+254 (713) 840 107


Cytonn Investments Management Plc, 6th Floor, The Chancery, Valley Road, P.O. Box 20695 – 00200, Nairobi, Kenya.

info@cytonn.com | +254 (0) 20 4400420 | +254 709 101000