Kenyan shares hit a two-year high on Friday, extending a two-week rally, led by banking stocks expected to post good full year results from next week, while the shilling firmed slightly.
The main NSE-20 share index rose for the eighth straight session, up 0.6 percent to 4,588.42 points, a level last seen Jan 10, 2011, when it closed at 4,610.92 points.
The index has gained 11 percent since the start of the year, adding to a 29 percent rally last year, as investors bet on strong company full-year results on the back of lower inflation, declining interest rates and a stable shilling.
"Investors are very bullish on financial stocks. We are seeing fat orders from fund managers and foreign investors," said Rufus Mwanyasi, an analyst at Tsavo Securities.
Standard Chartered rose for the fourth straight session to a new 23-month high, up 1.9 percent to 274 shillings a share.
Kenya Commercial Bank, the country's biggest bank by assets, rose 1.4 percent to 35.50 shillings a share. It hit a new all-time high of 36 shillings during the session.
On the foreign exchange market, the shilling firmed slightly to close at 87.45/65 per dollar, compared to Thursday's close of 87.55/75, helped by tightening liquidity.
"(The shilling) should be supported by the interbank rates and the repurchase agreements," said Dickson Magecha, a senior trader at Standard Chartered Bank.
The central bank has been actively mopping up banks supplies via repurchase agreements, lifting the weighted interbank rate for the 17th straight session to 7.99 percent on Thursday, from 5.43 percent on Jan. 15.
A Bank of Africa report said with inter-bank interest rates gradually edging up, most banks had opted to cut any long dollar positions to avoid missing out on the return they get on assets held in shillings.
The bank has also sold dollars on seven separate sessions this year, pushing down its foreign currencies reserves for five straight weeks to a seven-month low of $4.959 billion last Friday.
The shilling, which is down 1.5 percent against the dollar so far this year, is still expected to come under pressure towards the March 4 elections.
Traders said fears of violence linked to the elections would likely see importers stockpile the dollar, putting pressure on the shilling.
The ballot will be the first since political opponents disputed President Mwai Kibaki's re-election in late 2007, sparking nationwide violence that killed more than a thousand people.
In debt, bonds worth 1.09 billion shillings ($12.5 million) were traded on Friday, up from 771.3 million shillings on Thursday.
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- Reuters
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