Kenyan stocks inch up on foreign appetite

By George Obulutsa NAIROBI (Reuters) - Kenyan shares edged higher on Tuesday as foreign investors bought banking stocks, encouraged by signs of an improving economic outlook and strong first half results for the sector. On the Nairobi Securities Exchange, the main NSE-20 Share Index closed up 0.1 percent at 4,715.34 points. Kenya Commercial Bank, east Africa's largest by assets, ended trading up 1.1 percent higher at 44.75 shillings per share. Equity bank, Kenya's largest by customers, closed up 0.75 percent. "(It's due to) good positive first half performance and I think they are also quite optimistic about the macroeconomic environment, and the interest (rate) is coming down," said Joy Migongo, research analyst at Kestrel Capital. The International Monetary Fund said on Monday that Kenya's economic prospects looked more favourable after a peaceful March election and investors seemed undeterred by a trial of the president and his deputy on charges of crimes against humanity. High liquidity has pushed debt yields lower on the short end of Kenya's debt curve, and a further fall in rates is expected at this week's auctions. The rate of return is looking less attractive as yields fall towards the central bank's key lending rate, currently set at 8.5 percent, market players said. The Kenyan shilling was steady on Tuesday, but traders said they expected it to firm slightly in coming sessions as companies prepare to make domestic tax payments in the local currency, while stocks edged higher. At close of trade at 1300 GMT, commercial banks quoted the shilling at 87.50/60 to the dollar, the same as Monday's close. "We're still range-bound within 87.35 to 87.65. We should see the shilling appreciate a bit because of a tight money market, as we go into the (payment) of corporate taxes," said a trader at one commercial bank. Corporate taxes are paid quarterly in Kenya, with the next round of payments expected at the end of September. Traders said that for the moment dollar flows into the market from exporters like tea exporters were being matched by demand. The shilling is 1.5 percent weaker in the year to date. On the secondary market, government bonds valued at 1.50 billion shillings were traded, up from 1.05 billion shillings on Monday.