UPDATE 1-Kenyan shilling seen weaker after rate cut

Thu Jan 10, 2013 10:49am EST

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(Adds markets close, stocks)
    By Kevin Mwanza and Beatrice Gachenge
    NAIROBI, Jan 10 (Reuters) - Importer demand for dollars
weakened the Kenyan shilling on Thursday and it was seen
losing more ground after policymakers cut the key lending rate.
    However, stocks rose to a new 22-month high helped by
foreign investors.
    Kenya's Monetary Policy Committee cut its central Bank Rate
 by 150 basis points to 9.50 percent, half an hour
before markets closed. 
    The shilling did not react after the rate cut, but was
hovering at a seven-month low at 86.60/80 per dollar at the 1300
GMT close, 0.2 percent weaker than Wednesday's close of
86.50/70.
    "The shilling could weaken a bit more in coming weeks as the
market adjusts, but not by much since the market had already
factored in the rate cut," said Robert Gatobu, a trader at Bank
of Africa.
    While forecasts had centred on a 100 basis point cut in the
benchmark lending rate to spur economic growth,
forecasts had ranged up to 200 bp. 
    Policymakers have so far slashed the central bank lending
rate by 850 basis points since July, but commercial lending
rates have been stuck at about 20 percent.
    Normally, a cut in rates would nudge banks to lower their
lending rates and drive up demand for dollars, as businesses
find it cheaper to finance their imports, heaping pressure on
the shilling.
    "The central bank need to cajole by all means necessary the
banks to reduce their lending rates because these remain
stubbornly high and a toll charge on the economy," said Aly Khan
Satchu, an independent analyst based in Nairobi.
    On the Nairobi Securities Exchange, the benchmark NSE-20
Share index added 0.3 percent to 4,319.73 points,
helped by anticipation of strong full-year results from banks.
    Kenya's main power producer KenGen rose 3.3
percent to close at 9.45 shillings, after rising 5.5 percent
during the session to a one-month high of 9.65 shillings.
    Kenya Commercial Bank, the country's biggest bank
by assets, rose 1.6 percent to close at 31.75 shillings, after
hitting a high of 32.25 shillings, last touched on April 29,
2008. 
    "The market is largely driven by foreign investors," said
Virginia Wairimu, an analyst at Suntra Investment, suggesting
that fiscal crises in the euro zone and United States had
prompted investors to reassess their view of risk.
    The Kenyan stock market outperformed most of the indices in
the continent last year, ranking third after Nigeria and Uganda,
mainly driven by strong financial performances of blue-chip
companies. 
    Banks are expected to turn in healthy full-year profits by
March, taking a cue from the strong nine-month numbers that had
whet the appetite of both local and foreign investors, Wairimu
said.
    In debt, the weighted average yield on the three-month
Treasury bills inched lower to 8.105 percent at an
oversubscribed auction on Thursday from 8.122 percent last week.
 
               ...........................Shilling spot rates
                  .....................Shilling forward rates
                           .......................Cross rates
         ..................................Local contributors
           .......................Central Bank of Kenya Index
          .....................Kenyan Bonds contributor pages
                          ...............Treasury bill yields
        ..................Central bank open market operations
        .........................Horizontal repo transactions
         ,       ................Daily interbank lending rate
              .............................Kenya Bond pricing
             ..................Real time Africa economic data
 <ECI & AFR> ...........................African economic news
          .................................NSE-20 Share Index
         .................................NSE All Share Index
             ...........................FT NSE Kenya 15 Index
             .......................... FT NSE Kenya 25 Index
  SPEED GUIDES:
                                    
            
 
 (Editing by George Obulutsa/Ruth Pitchford)
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