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Kenyan shares drop, ending strong winning streak

07 August 2014, 19:05

Nairobi - Kenyan banking shares and those of East African Breweries Ltd (EABL) fell on Thursday, ending five days of gains on the bourse. The shilling held steady.

The Nairobi Securities Exchange's main NSE-20 Share Index fell 0.2 percent or 10.86 points to close at 5,011.51 points.

Shares in EABL, the region's biggest brewer, fell 1.3 percent to 309 shillings on profit-taking before the release of its full-year results, traders said.

KCB Bank Group, the largest bank in Kenya by assets, fell 0.52 percent to 55.00 shillings, largely because the value of the stock was diluted when additional shares were listed under the company's Employee Share Ownership Programme.

"KCB traded very actively during today's session," said Kuria Kamau, a research analyst at Kestrel Capital.

"There were new shares that were being credited. Those are the ESOP shares coming into the market and as a result there is some dilution."
On the foreign exchange market, the shilling closed at 87.85/95 to the dollar, unchanged for Wednesday's close.
The Central Bank of Kenya has been injecting local currency into the market for the past week, to ease tight liquidity that has led to rising interbank lending rates.

Traders have said the cash crunch in the money market was caused by delays in the government disbursing funds to departments and local authorities. The central bank was injecting too little to bring down the rates, some traders said.

On the interbank market, the weighted average lending rate rose to 11.4557 percent on Wednesday from 10.7589 percent a day earlier, while volumes borrowed fell to 7.52 billion shillings from 15.48 billion shillings ($176.31 million).

The central bank said it planned to inject 15 billion shillings into the money markets on Thursday, a day after injecting the same amount using reverse repurchase agreements at a weighted average rate of 13.782 percent.

Traders said there was dollar demand from oil companies, but the tight liquidity was propping up the shilling.
"We have seen the liquidity is improving but the rates are still going up, indicating that there is still demand for the local currency," said a senior trader at one commercial bank.

"We've seen (dollar) demand filtering through but the tightness in the market is what is supporting the local currency."

They forecast the currency to trade in the 87.50 to 88.00 range in coming days. On the secondary market, government bonds valued at 3.17 billion Kenyan shillings ($36.10 million) were traded, down from 4.45 billion shillings traded on Wednesday.

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- Reuters


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