Tax worries push Kenyan shares to 14-week low

By Kevin Mwanza

NAIROBI (Reuters) - Kenyan shares fell for the eighth straight session to hit a 14-week low on Tuesday as investors jolted by a planned re-introduction of capital gains tax booked profits on this year's rally.

Kenya's finance minister said last Thursday that East Africa's largest economy planned to reintroduce a tax on capital gains, a move analysts say could deter foreign investors and put pressure on the shilling.

The main NSE-20 share index fell 1.3 percent to 4,701.22 points, a level last reached on March 8. The index has lost 5.9 percent since June 6.

"There is a lot of indecision and fear of the uncertainty that this new tax will bring to the market," said Rufus Mwanyasi, an analyst at Tsavo Securities.

Kenyan shares have rallied over 20 percent this year, lifted by foreign investors returning to the bourse after March's presidential election passed peacefully, avoiding a repeat of the nationwide bloodshed that followed a disputed vote in 2008.

Kenya Airways, one of Africa's leading airlines, fell 3.8 percent to 10 shillings a share as sentiment on the stock remained weak over its full-year loss, reported last Friday.

In the foreign exchange market, the shilling held steady but looked vulnerable to pressure from foreign investors selling local stocks and demand for dollars from importers.

By the 1300 GMT market close, commercial banks quoted the shilling at 85.65/85 per dollar, the same as Monday's close.

"The shilling is weakening following the sell-off on the stock market. There are signs of importers coming in to buy dollars," said Sheikh Mehran, a senior trader at Kenya Commercial Bank.

The shilling has fallen 1 percent since June 6, but it is still up 0.7 percent against the dollar so far this year.

Traders said the shilling was also tracking weaker emerging markets due to uncertainty surrounding central bank monetary stimulus programmes.

In debt, bonds worth 3.2 billion shillings were traded on Tuesday, higher than the 1 billion shillings exchanged on Monday.

Source: http://news.yahoo.com/tax-worries-push-kenyan-shares-14-week-low-142353121.html

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