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WORLD STOCKS HIT 4-MONTH HIGH

By NBF News

World stocks hit a more than four-month high on Tuesday as investors continued to recover from their summer concerns about a slowing global economy.

MSCI's all-country world stock index hit a session high of 298.50, the highest level since May 5, Reuters reported from London on Tuesday.

It put the index some 8.5 per cent higher than its August low, but still left it down around 0.4 per cent for 2010.

Investors have been encouraged to move back into riskier assets recently by signs that China's economy is still able to drive world trade and easing concerns about the stability of the world financial system.

The VIX volatility index, VIX, seen by many as a sentiment indicator for equities, has been falling almost steadily since May, a sign of renewed confidence.

Meanwhile, trading in Kenya's bond market jumped more than six times in the first eight months of 2010 from the same period last year as banks put cash into bonds rather than lending and government debt issues grew.

Nairobi Stock Exchange statistics showed that a total 361.2bn shillings ($4.45bn) worth of bonds were traded over January-August, compared with 62.3 billion previously.

The bond market traded 110.6 billion shillings in the whole of 2009 and 95.4 billion shillings in the previous year.

Analysts pointed to sluggish loan growth that has prompted the central bank to cut its policy rate by 75 basis points to six per cent in the hope of stimulating lending.

'If you look at bank assets, some have almost doubled participation in the debt market,'' Mr. George Bodo, investment analyst at Genghis Capital, said.

'The loan uptake has not been that fast so they have cash reserves on their books. They can't participate in equities so they dump their cash in government securities,' he said.

The central bank has also increased the size and frequency of bond issues this year, while also boosting liquidity by reopening issues, one trader said.

Treasury has raised nearly 47 billion shillings in two infrastructure bond issues this year.

It also re-opened a 25-year bond for 15 billion shillings in July, just a month after the initial issue for 7.5 billion, amongst other shorter-term issues.