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UPDATE 1-Equity Bank and Safaricom shares lift Kenyan stocks

* Analysts say new tax measures to hurt Safaricom's revenues

* Tea inflows to offset importers' dollar demand next week

(Recasts markets close, adds stocks)

By Beatrice Gachenge

NAIROBI, Oct 5 (Reuters) - Kenya's stock market edged higher for the third day in a row on Friday, boosted by a jump in shares of Equity Bank

and Safaricom

, the bourse's two most heavily traded companies, while the shilling closed flat against the dollar.

The benchmark NSE-20 share index

added 0.4 percent to finish at 3,961.05 points.

Equity Bank, Kenya's biggest bank by customer numbers, rose 2.2 percent to 23.50 shillings ($0.27) per share, cheered by the appointment of a new chief operating officer and a group finance director on Thursday.

"The market was positive on the appointments because it clears a lot of issues on the succession plan," said Johnson Nderi, head of research at Suntra Investment Bank.

Safaricom, the country's biggest mobile phone provider and one of the most capitalised stocks in the bourse, climbed by 1.3 percent to 4.05 shillings.

However, analysts said the government's introduction of a 10 percent levy on fees charged on mobile phone-based money transfer services, including Safaricom's M-Pesa, would hurt the company's earnings.

"Revenues of Safaricom will be hit from two fronts, the new taxes and the Communication Commission of Kenya (CCK) plans to cut mobile termination rates," said Nderi.

M-Pesa, which contributes about 16 percent to total revenues of Safaricom, saw its own revenues grow by 43 percent to 16.9 billion shillings in the business year to the end of March.

Kenya's telecoms regulator plans to cut the rate mobile phone operators charge each other for calls made across networks by 35 percent to 1.44 shillings per minute.

In the foreign exchange market, the shilling

ended

the session at 84.85/85.05 per dollar, barely changed from Wednesday's close of 84.85/95.

Traders said the shilling would remain rangebound next week, with inflows from tea exports during the country's weekly auction expected to offset poor demand for the U.S. currency.

"We expect the normal agricultural inflows, which will help support the shilling on any (dollar) demand we see," said Julius Kiriinya, a trader at African Banking Corporation.

Kenya is the world's biggest producer of black tea, and the crop is the country's top foreign exchange earner.

The central bank once again mopped up excess liquidity in the market on Friday, soaking up 2.32 billion shillings from bids worth 3.82 billion shillings, which was some way short of 7 billion shillings it intended to mop up.

In the debt market, bonds worth 3.52 billion shillings were traded, down from 5.64 billion shillings on Thursday.

...........................Shilling spot rates

.....................Shilling forward rates

.......................Cross rates

..................................Local contributors

.......................Central Bank of Kenya Index

.....................Kenyan Bonds contributor pages

...............Treasury bill yields

..................Central bank open market operations

.........................Horizontal repo transactions

,

................Daily interbank lending rate

.............................Kenya Bond pricing

..................Real time Africa economic data

...........................African economic news

.................................NSE-20 Share Index

.................................NSE All Share Index

...........................FT NSE Kenya 15 Index

.......................... FT NSE Kenya 25 Index

SPEED GUIDES: (Editing by Drazen Jorgic)

((nairobi.newsroom@reuters.com)(Tel: +254202224717))

Keywords: KENYA MARKETS/