AFRICANGLOBE – Kenyan shares reached their highest close since July 2008 on Monday as investors welcomed comments defending the Federal Reserve’s money printing by Janet Yellen, who is expected to take charge of the U.S. central bank next year.
“Yellen has eased the macro-environment for frontier stocks,” said Aly Khan Satchu, an independent stocks trader in Nairobi.
He said her comments last week were a “hugely important announcement for these markets” and for the continued flow of cheap money from developed countries chasing returns in the faster-growing economies of Africa.
The benchmark NSE-20 share index edged up 0.3 percent to close the day at 5,058.16 points, lifted by gains in telecom and bank shares.
The Kenyan market on Friday broke above its previous 2013 highs reached in early April after a dispute over the results of a presidential vote was resolved peacefully in court.
The settlement calmed fears of a return to ethnic violence that followed the previous election in 2007.
Rapid economic growth and bright prospects for company earnings in several east African countries has drawn more investors into Kenyan stocks in recent weeks.
Officials project that Kenya’s gross domestic product will grow by 5.5-6 percent this year, accelerating from 4.6 percent in 2012.
Shares in telecoms operator Safaricom rose 0.5 percent to close at a record 9.90 shillings in heavy volume.
Lynette Muriungi, a research analyst at Kestrel Capital, cited expectations that the firm will increase revenue from data services.
The company, 40 percent owned by Vodafone, has made it clear it expects higher dividends for the year ending next March because of increased free cash flow.
In the foreign exchange market, the shilling finished unchanged against the dollar as traders waited to see the impact of tax payments on liquidity.
At the 1300 GMT market close, commercial banks put the shilling at 86.45/55, unchanged from Friday.
Traders said the level of liquidity seen in the money markets after a November 19 deadline for tax payments could drive the foreign exchange rate.
The overnight borrowing rate has been tumbling for the past week, causing the shilling to weaken as banks found it slightly easier to fund long dollar positions.
The rate dropped to 9.1822 percent on Friday from nearly 13 percent at the start of the week, aided partly by a central bank move to inject liquidity using reverse repurchase agreements.
Sheikh Mehran, a senior trader at KCB Bank, said a treasury bond auction for up to 10 billion shillings scheduled for Wednesday could further curb liquidity in the money markets.
Technical charts showed if the shilling fell past dollar resistance of 86.50, it could weaken towards 88.00.
In the debt market, bonds worth 401 million shillings were traded, down from 1.56 billion shillings worth of debt traded in Friday’s session.