NAIROBI (Reuters) - Kenyan shares rallied to a 28-month high on Friday, with foreign investors encouraged by progress in the counting of votes from Monday's presidential election.
The index, which is up almost 11 percent so far this year, has gained steadily since Kenyans voted peacefully in huge numbers on Monday.
The delayed results have lead to challenges from the two front-runners' camps, bringing back painful memories of the disputed 2007 vote which ignited weeks of violence. But while the slow count has raised anxiety levels among Kenyans, the country has remained calm.
"As the tallying process winds up, market anxiety seems to be easing as indicated by a return of foreign investors on the buy side," said Faith Atiti, an analyst at NIC Securities.
The benchmark NSE-20 share index rose 1.6 percent to 4,658.64 points, a level last touched on November 8, 2010, when it closed at 4,668 points.
Kenya's electoral commission said it was determined to complete the count on Friday in a tight presidential race that has put Uhuru Kenyatta ahead of his main rival Prime Minister Raila Odinga and in with a chance of outright victory.
A Kenyatta win would pose a dilemma for Kenya's big Western donors because he is due to go on trial at The Hague on charges of crimes against humanity linked to the violent aftermath of the last election in 2007. If neither Kenyatta nor Odinga secure more than 50 percent of the vote, the vote goes to a run-off that is set for April.
"The election is holding the market hostage," said Rufus Mwanyasi, an analyst at Tsavo Securities. "The market is likely to break out 30-35 percent growth this year if the election ends well."
Shares in sugar grower and miller Mumias jumped 6.7 percent to 4.80 shillings, recovering after investors had offloaded the stock following a profit warning last week.
In the foreign exchange market, the shilling ended steady at 86.10/30 against the dollar, the same level it closed at on Thursday.
Trade in the shilling, off an 18-week high of 85.10 hit shortly after voting passed off peacefully on Monday, has since been volatile as investors assessed the implications of the delay.
Comments from leading officials questioning the voting process have unsettled investors, but international observers have broadly said the vote and count were transparent.
"The scenarios are a winner is announced and people accept, which will see the shilling strengthen, or a winner is announced and people don't accept, which will be negative for the shilling," said Peter Mutuku a trader at Bank of Africa.
The shilling, 0.2 percent stronger against the dollar so far this year, was supported by the central bank's continued stance of mopping up of liquidity, making it costly to hold long dollar positions.
In the debt market, bonds worth 205 million shillings were traded on Friday, down from 1.55 billion shillings in the previous session.
(Editing by Richard Lough/Ruth Pitchford)