Banks stocks lift Kenyan bourse, shilling steady

NAIROBI (Reuters) - Kenya's main share index climbed for a second session on Wednesday led up by banking shares as investors grew optimistic that credit demand will start to improve following a record rate cut last week, while the shilling held steady.

Policymakers cut the central bank rate (CBR) by a record 350 basis points on September 5 to 13 percent, the second time it has eased this year, and is expected to improve credit access and support economic growth in the east Africa nation.

The Nairobi Securities Exchange's NSE-20 share index rose 1 percent to 3,941.10 points, helped by bank stocks.

"The reduction in CBR means banks have reduced their fixed deposit rates so there will be growth in assets, assuming banks start to lend at lower rates," says Vimal Parmar, head of research at Kestrel Capital.

Kenya Commercial Bank, the biggest bank in asset terms -- which has followed the central bank rate cut with its own 300 basis points reduction -- climbed 3.7 percent to 28 shillings.

Barclays Bank rose 3.9 percent to 14.40 shillings and Cooperative Bank added 3.5 percent to 11.80 shilling, while Standard Chartered Bank gained 1.9 percent to 217 shillings, as investors bet they will cut their base rate too.

In the foreign exchange market, the shilling ended Wednesday's session at 84.10/30 per dollar, barely changed from 84.05/25 at close of trade on Tuesday.

Traders said the shilling is poised to gain in coming days as global markets rally and investor appetite for risky assets swells on the back of improved optimism about the euro.

Typically, when the euro gains against the dollar, investors buy into assets perceived to be risky in emerging and frontier markets like the shilling.

"The shilling is riding on positive sentiment and international risk appetite as it tracks similar gains in the euro," Bank of Africa said in a daily report.

The shilling is up 1.2 percent in the year to date, helped by a tight monetary stance adopted by policymakers for most of this year. But last week's rate cut is seen posing a downside risk to the local currency.

In the debt market, the weighted average yield on the 182-day Treasury bills fell to 8.993 percent at the auction on Wednesday, from 9.351 percent last week as investors expecting rates to fall further in coming sales oversubscribed the paper.

Government and corporate bonds worth 4.5 billion shillings were traded, down from 6.2 billion shillings on Tuesday.

Source: http://news.yahoo.com/banks-stocks-lift-kenyan-bourse-shilling-steady-145051730--finance.html

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