Kenya stocks at 1-year high, shilling flat

By Beatrice Gachenge NAIROBI (Reuters) - The Kenyan stock market rose 1 percent to a year high on Thursday, as investors anticipated positive results at the beginning of the corporate earnings period, while the shilling traded flat, supported by tax payments. On the Nairobi Securities Exchange, the main NSE 20-Share index rose to 3,825.93 points, a level last seen on July 21 2011. "The earnings season has kicked off and what can be seen, is guys taking positions," said Samora Kariuki, an analyst at NIC Securities. The country's No. 2 cement manufacturer, Athi River Mining, was the top gainer of the main index, rising 8.8 percent to 198 shillings, while beer maker East African Breweries rose 1.3 percent to 227 shillings. On the foreign exchange market at the 1300 GMT close, the shilling was at 84.10/20 to the dollar, barely moved from Thursday's close of 84.05/25. "(Shilling) Tax payments went through and that tightened the market," said Chris Muiga, a trader at Kenya Commercial Bank, adding that that caused the central bank to stay out of the repurchase agreement market for first time this week. Traders, who had expected money supply of 6 billion shillings from maturing repos of various durations in the session, said payment of value added taxes due on Friday, had seen companies withdraw money from banks, reducing excess supply of shilling. The central bank has regularly drained excess shillings from the market this year through seven-day, 14-day, 21-day and 28 day repurchase agreements, underpinning the currency, which has strengthened by 1 percent against the dollar so far this year. In the last eight sessions, the bank has absorbed 24.73 billion shillings. Commercial banks have shunned the debt market in favour of repos after yields on government paper fell as the central bank cut key lending rates. On Thursday, yields on Kenya's 91-day Treasury bill rose to 12.929 percent at in an oversubscribed auction, from 12.001 percent previously. The bank said it received bills worth 4.2 billion shillings for the 3 billion shillings worth of debt on offer, a 140 percent subscription rate. It accepted bids worth 2.9 billion shillings. The yields were still well below last year's rates, which reached about 20 percent. Traders had anticipated that the central bank would push liquidity back to the debt market, after months of low subscription rate, due to low yield. Ignatius Chicha, head of markets at Citibank said the central bank was likely to push liquidity back to the debt market by propping up yields to converge with repo rates, probably at 13 percent and by dropping repo rates. In the debt market, government bonds worth 1.06 billion shillings were traded, down from 1.94 billion shillings previously, with most activity on the 12-year infrastructure bond at a yield of 12.35 percent. Source