Kenyan shilling little changed after budget speech, stocks fall
13 June 2014, 09:23
Nairobi - The Kenyan shilling trod water against the dollar on Thursday after Kenya's finance minister delivered a budget speech that focused on improving security and infrastructure, while stocks closed lower.
At the 1300 GMT close of the market, leading commercial banks posted the shilling at 87.80/90, barely changed on Wednesday's close of 87.70/90.
Finance Minister Henry Rotich read out the government's 2014/15 (July-June) fiscal budget in parliament. The budget envisages 1.581 trillion shillings ($18 billion) in spending and a deficit of 342.4 billion shillings.
He said Kenya's economy is expected to grow 5.8 percent in 2014 and 6.4 percent in 2015, compared with the 4.7 percent expansion recorded in 2013.
Rotich said 190.8 billion shillings of the deficit will be financed by net borrowing from the domestic market while the rest of the shortfall would be raised from net external financing.
He said enhancing security and infrastructure was vital for the economy to grow and create jobs.
Traders said there was no immediate reaction by the local currency to the budget speech.
"We will see how the market opens after digesting (everything) that was said. We'll see the reaction tomorrow," said Joshua Anene, a Commercial Bank of Africa trader.
The shilling has been on the back foot and has fallen nearly 2 percent against the dollar since January, partly on diminished hard currency flows from tea exports owing to weaker prices and tourism after a series of attacks in the capital Nairobi and port city of Mombasa, a tourist magnet.
Traders have said previously that if Kenya secures strong demand for its debut Eurobond, which it is now marketing to investors abroad, the shilling could get a boost.
On the stock market, the benchmark NSE-20 share index shed 0.43 percent or 21.09 points to close at 4,832.09 points. The All Share Index was barely changed.
The biggest losers on the NSE-20 index were cement firms ARM Cement and Bamburi Cement.
ARM, which has fallen 15 percent since January, declined 2.5 percent to close at 76.50 shillings. Bamburi lost 1.1 percent to close at 173 shillings per share. The company's stock has shed 17.6 percent since the start of the year.
"There are some concerns creeping into the cement sector that there is a lot of capacity coming on board. I think that there has been some more defensive trading around the sector," said analyst Aly Khan Satchu.
The Nairobi bourse closed shortly before the budget speech started. Analysts said the focus on Friday morning will be on new taxes announced by the finance minister which could hurt local companies such as East African Breweries.
An excise duty levied last year on the brewer's top-selling Senator Keg beer - which was previously exempt from excise duties - hiked its price 60 percent to 40 shillings and cut its sales 85 percent in the six months through December.
"We want to (look at the small print and) see if that's been reversed," said Kuria Kamau, research analyst at Kestrel Capital.