UPDATE 3-Kenyan shilling rallies as investors bet on calm vote

Thu Feb 28, 2013 10:58am EST

* Hopes of peaceful elections spurs investor confidence
    * Importers had been stocking up dollars ahead of elections
    * Profit warning knocks 13 pct off Mumias Sugar

 (Adds markets close)
    By Kevin Mwanza and Beatrice Gachenge
    NAIROBI, Feb 28 (Reuters) - The Kenyan shilling 
rallied on Thursday for a sixth session to touch its strongest
level against the dollar so far this year, as investors hoped
Monday's elections would prove peaceful, while shares inched up.
    The shilling firmed as much as 0.8 percent on the day to
85.60 per dollar, last reached on Dec. 27, but gave up some of
its gains to close at 86.00, Thomson Reuters data showed
.
    The shilling has now rallied over 2 percent in the past six
sessions, wiping out losses made earlier this year when
importers stockpiled dollars before the vote.
    "The correction was overdone that's why it has come back to
around 86.00 on interbank short covering," said Ignatius Chicha,
head of markets at Citibank. 
    "How the shilling behaves after the vote will depend largely
on the noise in the market. If due process is followed and it
goes smoothly, the shilling might hold on to the gains." 
    Worries about a return of the bloodshed that followed the
last poll in 2007 have eased as candidates and officials have
promised a peaceful vote.
    Monday's closely contested presidential vote is the first
since President Mwai Kibaki's re-election in 2007, a win that
prompted opposition accusations of rigging and unleashed weeks
of inter-tribal fighting that killed more than 1,200 people.
    Front-runners Prime Minister Raila Odinga and former Finance
Minister Uhuru Kenyatta are neck-and-neck in the polls. If no
candidate wins an absolute majority, the vote will go to a
decisive run-off in April.
    "The risk premium on the Kenyan elections has fallen," said
Raphael Owino, assistant general Treasury manager at Commercial
Bank of Africa. "The way it's going, the shilling is likely to
trade at 85.00 and below if the elections go well."
    The central bank has also been intervening to support the
shilling by mopping up excess liquidity from the money markets
on an almost daily basis, while occasionally selling dollars to
banks. 
    Liquidity surged in the money markets after risk-averse
investors opted for short-term financial assets ahead of the 
polls. 
    On the stock market, the main NSE-20 share index 
inched up 0.1 percent to 4,518.59 points as a number of listed
firms announced their interim and full-year results.
    Three top banks, Kenya Commercial Bank, the
country's biggest bank by assets, Equity Bank, the
country's biggest bank by customers and Co-operative Bank
, posted double-digit percentage profit growth.
 
    Shares in Equity rose by 1.8 percent to 28.25 shillings per
share, while Co-operative Bank gained 3 percent to close at
13.75 shillings each following the results.
    The NSE-20 has risen 9.2 percent this year, helped by strong
earnings.
    Shares in sugar grower and miller Mumias tumbled
13.4 percent to 4.20 shillings a share after it warned on
Wednesday that its full-year profits will fall by more than 25
percent. 
    In the debt market, the weighted average yield on the 91-day
Treasury bills rose to 9.368 percent, during a
primary action met by big demand. 
    "Some guys are seeing Treasury bills as short-term safe
havens ahead of the elections. Fund managers are mostly on the
buy side," said Crispus Otieno, a trader at Afrika Investment
Bank. 
    In the secondary debt market, bonds worth 3.3 billion
shillings were traded, up from 1.9 million shillings on
Wednesday.
               ...........................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 Toby Chopra)
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