Kenya market cap leader Safaricom weighs on stocks

Safaricom, Kenya's largest company by market capitalisation, dragged down the main
index after losing more than 4.0 percent on Friday.

The shilling KES= was largely stable as traders covered short positions ahead of the weekend, and bond yields fell.

Kenya's leading mobile provider, Safaricom, shed 4.16 percent to 4.60 shillings a day after major rival Bharti Airtel (BRTI.BO) slashed tariffs on its network.

Traders said the price cuts would have a major negative impact on Safaricom.

Safaricom can either reduce their prices in order to maintain market share. If not, they maintain their margins but lose out on market share. The price cut is significant to Safaricom's revenues, said John Kamunya, head of research at Dyer & Blair.

The benchmark NSE 20 share index .NSE20 finished the week 12.58 points lower at 4,551.07 while the all share index shed 0.15 points to settle at 101.75 points.

Whichever direction Safaricom takes, it largely reflects on the market since it has the bulk of the market, said Kamunya.

In bond trade, total turnover was 768.4 million shillings, up from Thursday's 581.1 million shillings, propelled by 15-year securities, which accounted for more than half of the trade.

The 15-year bonds traded in a range of 9.50-10.75 percent, compared with 10.70 percent Thursday.

Kenya has significantly increased the number of its Treasury bill issues to deepen its rapidly evolving fixed income market and perhaps to take advantage of favourable near-term rates.

At the close of trade at 1300 GMT, banks quoted the shilling at 80.90/81.00 compared with Thursday's close of 80.85/95, after giving up gains made in the last three trading sessions. The
80.85/95 range is the strongest the shilling has traded this week.

It is partly due to short position covering as we go into the weekend and thin corporate dollar demand, said Mark Deane, senior trader at I&M Bank.

The local currency unit opened Friday trade stronger against the dollar on the back of an internationally weak greenback.

A strong euro and pound after the release of positive fundamental data yesterday has stabilised interest rates in the eurozone and increased appetite for riskier currencies, said
Vimal Chudasama, senior trader at Chase Bank.

This typically means there is higher demand for the euro and the pound, translating to a globally weak dollar.

Currently the major world currencies affect the shilling since we have increased international currencies trading largely driven by fund managers and big banks, he said.

Kenya has attracted increased interest among fund managers looking to diversify their portfolios in frontier markets such as the biggest economy in east Africa, pegged on the prospects for economic growth.

Traders are watching Kenya's central bank, which has been buying hard currencies to increase its reserves but has so far stayed out of the foreign exchange market this year.

The central bank is at the back of every traders' mind. They (CBK) could move in now that we are below 81 rate, said Chris Muiga senior trader at Kenya Commercial Bank.