NAIROBI, Jan 2 (Reuters) - Kenya's shilling was seen
weakening, with traders saying on Friday that a new capital
gains tax introduced this year could trim hard currency inflows
and weaken the local currency. Stocks were stable.
At close of trade at 1300 GMT, commercial banks quoted the
shilling at 90.75/85 to the dollar, compared with Wednesday's
close of 90.70/80. Kenyan markets were closed on New Year's Day.
President Uhuru Kenyatta signed into law a 5 percent capital
gains tax on Sept. 15 that took effect on Jan. 1, which
investors say could affect investment in property, equities and
the country's nascent oil and mining sectors.
Ian Kahangara, a trader at National Bank of Kenya, said the
new tax was expected to affect dollar inflows from foreign
investors, thus leading to a weaker shilling.
A trader at another commercial bank also said the capital
gains tax would affect the inflows.
"I am really hoping they don't implement it. This sort of
thing will definitely have an effect on foreign investor
participation in our markets," the trader said.
The central bank mopped up 8.65 billion shillings ($95.32
million) in excess liquidity. Mopping up excess liquidity makes
it relatively costlier to hold long dollar positions, which
partly supports the shilling.
Julius Kiriinya, a trader at African Banking Corporation,
said the mop-up by the central bank did not affect the shilling.
The shilling weakened against the dollar last year, in part
because of dollar demand from importers and flagging tourism - a
key source of hard currency east Africa's biggest economy -
after a series of Islamist attacks in the country.
On the Nairobi Securities Exchange, the main NSE-20 Share
Index closed up 4.78 points, or 0.09 percent, at
5,117.43 points.
On the secondary market, government bonds worth 633 million
shillings were traded, compared with 1.2 billion shillings
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