UPDATE 1-Kenyan shares soar to 7-month high, shilling steady

Fri Aug 15, 2014 10:49am EDT

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By Drazen Jorgic

NAIROBI, Aug 15 (Reuters) - Kenyan shares jumped to a seven-month high on Wednesday as investors switched from bonds to equities. The shilling was steady.

The benchmark NSE-20 share index rose 0.5 percent to finish at 5,042.90 points, its highest level since Jan. 28.

Aly-Khan Satchu, an independent trader and analyst, said stocks have risen steadily this month as investors moved their money from bonds into the stock market, expecting government borrowing to dwindle and yields decline.

President Uhuru Kenyatta earlier this month said domestic borrowing would almost halve this fiscal year after Kenya issued its debut $2 billion Eurobond. The yield on benchmark 91-day Treasury bills has also fallen to 8.2 percent from 11.4 percent at the end of June.

"We've had a market that's been driven higher by foreign investors, who have been the catalyst, but all of a sudden you now have local investors who have to get in," Satchu said.

Shares in KenGen, the country's main electricity producer, jumped 9.3 percent to a three-month high on Friday. The company's shares have risen about a quarter this month.

Satchu said investors who were rattled by the company's escalating borrowing needs this year no longer worry that it will struggle to raise the capital to finance new plants.

"Recent events, including the Eurobond, are indicating that what looked like enormous supersize meal the market would not be able to digest suddenly looks digestible," he said.

In the foreign exchange market, commercial banks quoted the shilling at 88.00/20 to the dollar at the close of trading, barely changed from its closing level of 88.05/88.15 on Thursday.

The shilling has been supported by tight supply that kept companies reluctant to buy dollars, traders said, adding that the local currency would probably ease once liquidity improved.

"We are now trading (weaker than) ...the 88 level and in new territory. I think once liquidity is restored the shilling will weaken, it would be bearish for the shilling," said Nahashon Mungai, a trader at KCB.

Traders also said dollar inflows have been scant. Foreign earnings from Kenya's weekly tea auction have fallen because of over-production, which has kept tea prices subdued this year.

In the debt market, bonds worth 2.8 billion shillings were traded during the session, up from a volume of 4.1 billion shillings the day before.

...........................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:

(Additional reporting by James Macharia,; Editing by Duncan Miriri, Larry King)

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