Kenyan shilling dips as vote nears, shares halt rally

NAIROBI (Reuters) - The Kenyan shilling weakened against the dollar for the first time in seven sessions on Thursday as companies cut their exposure to the local currency ahead of an election next month.

In stocks, the main share index fell for the first time in 12 sessions as investors disappointed by Barclays earnings released on Wednesday sold off previously red-hot bank and telecoms shares.

The shilling was posted at 87.40/50 per dollar at the 1300 GMT close, down 0.1 percent from Wednesday's close of 87.20/40.

"Some corporates are looking to cover themselves ahead of the elections," said Ignatius Chicha, head of markets at Citibank. "But given liquidity is tight, the shilling will be well supported."

The east African nation holds a presidential election on March 4. The last leadership ballot in 2007 was followed by ethnic violence that severely damaged the economy.

The shilling has gained 0.3 percent against the dollar since February 5, helped by the central bank mopping up liquidity, which has sent short-term interest rates higher.

In the money markets, the weighted average interbank lending rate climbed to 9.7 percent on Wednesday from 9.4 percent on Tuesday.

The rate has risen for 21 consecutive sessions from a low of 5.43 percent on January 15, due to the tight liquidity.

The shilling is still down 1.3 percent in the year to date, mainly due to pressure from importers buying dollars to stock up on goods ahead of the vote.

"With the general elections just round the corner, the shilling still is not out of the woods, however it's much better placed at the moment than before," said Bank of Africa in a daily note.

At the Nairobi Securities Exchange, the benchmark index edged down 0.2 percent to 4,637.54 points led by market heavyweights.

The index had rallied 5.6 percent since January 29, driven by investors buying stocks, especially in banks, ahead of the release of full-year earnings which they expect to be strong due to falling interest rates and lower inflation last year.

"What came out with Barclays Bank (yesterday) did not give good signals to the market. Guys are rethinking their strategies," said Rufus Mwanyasi, an analyst at Tsavo Securities.

Barclays posted a lower-than-expected 8 percent rise in its full-year pre-tax profit on Wednesday.

Kenya Commercial Bank, the country's biggest bank by assets, dropped 3.9 percent to 37 shillings a share. The regional bank's shares had rallied 14.9 percent since February 1.

Safaricom, the country's leading telecoms operator and the most traded stock on the bourse, shed 1.8 percent to 5.60 shillings a share, while East African Breweries fell 2.2 percent to 308 shillings ahead of its half-year earnings on Friday.

The two stocks are the most capitalised on the Nairobi bourse.

On the primary debt market, the weighted average yield on the 91-day Treasury bills fell to 8.213 percent on Thursday from 8.229 percent last week.

On the secondary debt market, bonds worth 414.7 million shillings were traded, up from 256.6 million shillings on Wednesday.

Source: http://news.yahoo.com/kenyan-shilling-dips-vote-nears-shares-halt-rally-154006908--finance.html

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