7th January 2003

Kenya’s Blue Chips in New Year Stock Rally

Bid level on December 24 ahead of the Christmas break, but leapt to a 28-month high at 77.00/77.30 to the dollar on last Monday.
Traders attributed the shilling’s rampage to a major sell-off dollars by banks as the country anticipates a resumption of donor lending, suspended in late 2000 on graft concerns, and an influx of foreign direct investment (FDI).

“Trade has been volatile, mainly in one direction,” a dealer at the Co-operative Bank of Kenya told Reuters News Agency.

“There is a lot of hope in the new President and his team. People are expecting (foreign) aid and investors to come in. There is some sort of euphoria and no one wants to be caught long on dollars.”

Some dealers said the local currency was unlikely to make any further gains by the close of trade last Tuesday as most banks were expected to close their books at the month’s end.

“Most banks turn in their monthly reports today, and it is unlikely they will be in the market much,” Kihara Maina, head of trade at Barclays Bank of Kenya, told Reuters. He predicted the shilling would retrace some of its steps next week.

“We have had unique trading conditions as most corporates are out of the market due to holiday season and the shilling’s rise was exaggerated,” Kihara said.
“It is bound to retrace some gains by next week when fundamentals kick in as it was mainly euphoria-driven.” The shilling held firm after surging to a two-and-a-half year high against the US dollar in the wake of the presidential elections.

Prior to the elections, there was a lot of uncertainty and many investors opted to keep their money offshore. The smooth transition has now allowed for much of those funds to flow back in, in anticipation of a resumption of donor lending.
At the close of the week on Friday, shilling had risen by over 4 percent during the week to trade at 76.50 to the dollar.

South Africa’s rand began the New Year the same way it ended – buoyant. It jumped to 16-month highs around 8.50 to the dollar as the country’s high interest rates continued to attract foreign inflows.

Dealers reported that thin trading conditions exaggerated the moves in the rand. The market is not seen to return to normal volumes until early next week.
The rand has had a complete reversal of the losses it made at the end of 2001; the outlook for now is that 8.50 will serve as a natural support level.


Brighter Economic Prospects Spur Kenya Stocks to a Rally
Expectations of Resumed Donor Lending Spur Shilling to Two-and-a-Half Year High
By Christine Nyagode

KENYA’S blue chip stocks rallied higher last week giving in to the rising expectations of improved economic prospects under President Mwai Kibaki’s Government.
However, most of the shares that rebounded on the Nairobi Stock Exchange (NSE) were for the firms that the market expects to have improved earnings in the financial year just ended in December 2002.

The biggest winners in 2002 were also mainly restricted to banking, media stocks and specific sectors in the manufacturing industry. The agricultural sector, however, sustained the biggest fall in prices in 2002. Mumias Sugar Company, which last year debuted on the NSE with a poorly performing initial public offer (IPO), was vindicated in heavy year end trading that saw its share price appreciate by 173 percent to close at Sh17.35. Bamburi Cement, which had also been underperforming for four years. Saw its share price rise by 163 percent to close at Sh43.7 Bamburi Cement late last year reported impressive earnings and paid a hefty second dividend.

With the recessionary cycle of the building and construction industry coming to an end, Bamburi is expected to start riding through a construction boom which could be bolstered further should the new Government approve the use of cement products in road building. CMC, the automobile franchise dealers, also saw their stock price appreciate by 133 to Sh21 percent on the back of improved motor vehicle sales in Kenya. The Standard Newspaper Group (SNG) and Nation Media Group (NMG) saw their share prices appreciate by 44 and 95 percent respectively. SNG is now trading Sh10.1 and NMG Sh84.

Media stocks benefited from the advertising and circulation boom in the run-up to the elections. The advertising boom from the corporate sector is expected to pick up in 2003.

East African Breweries Limited (EABL), whose shares are now trading at Sh128, has been the darling of the market in the last one year with its stock price rising by 73 percent. The energy sector also enjoyed a price rally with Kenya Oil’s and Total Kenya’s share prices rising by 47 and 20 percent respectively. Kenya Oil is not trading at Sh107 and Total Kenya Sh22.75.

Among the banking stocks, Barclays bank of Kenya and Standard Chartered Kenya saw their share prices rise by 38 and 31 percent respectively. Barclays is now trading at Sh101 and Standard Chartered Sh62. the market has been gravitating towards Barclays and Standard Chartered because they are considered to be defensive stocks that are still expected to report strong earnings and pay hefty dividend.

The agricultural sectors pulled down the performance of the NSE-20 share index which barely nudged from its 1364 level at the close of the year in 2001. The AIG-27 share index which tracks the broader market and factors in dividend payments, rose by 37.75 percent in 2002 to close at 131.12. This indicates that though the broader market did not enjoy much in price gains, investors derived good income from their stocks. He agriculture sector in 2002 suffered from poor international prices of Kenya’s coffee and tea.

Meanwhile, the Kenyan Shilling in the last one week experienced a major appreciation riding on the back of a political euphoria of a new government, focused on economic reforms. Expectations that donors would resume lending to Kenya saw the Shilling enjoy a speculative run. Last Tuesday, the shilling rose to a fresh 28-month high following a pledge on Monday by President Mwai Kibaki to rebuild the battered economy and fight corruption. The shilling traded at 76.90/77.00 against the dollar after closing at 77.20/77.50 on Monday December 30, the inauguration day. It last traded at the 77.90 bid level in mid August 2000.
The unit closed at 79.60

Top Gainer	Closing Price	Change
Mumias Sugar	Sh 17.35	173%
Bamburi Cement	Sh 43.75	163%
Nation Media	Sh 84	95%
EABL	Sh 128	73%
Standard Newspapers	Sh 10.1	44%
Kenol	Sh 107	47%
Barclays Bank	Sh 101	38%
Stanchart	Sh 62	31%