Kenyan shares fell for the fifth straight session on Thursday as investors booked gains on this year's rally and shifted interest to the debt market, while the shilling was steady.
The benchmark NSE-20 share index fell 0.4 per cent to 4,584.50 points.
The index has lost 8.1 per cent since the start of June, driven by profit-taking, concerns over the end of the US stimulus programme and jitters about a government plan to re-introduce capital gains tax. It is up 11 per cent on the year.
Faith Atiti, an analyst at NIC Securities, said high subscriptions at Wednesday's bond sale could have starved the equities market of liquidity.
The central bank said it received bids worth a total Sh32.1 billion ($373.5 million) for the five- and 10-year bonds on offer worth a total of Sh20 billion, and accepted Sh25.0 billion.
"The market remains bearish as rising bond yields weaken short-term prospects for equities," Atiti said. "Yields on the recently issued bonds came in at nearly 100 basis points above market average."
East African Breweries, dropped 2.7 per cent to Sh320 a share, while mobile service company Safaricom fell 2.3 per cent to 6.50 shilling. The two firms have the largest capitalisation on the Nairobi bourse.
In foreign exchange, the shilling ended at 85.90/86.10 per dollar at 0758 GMT, barely changed from Wednesday's close of 85.95/86.15.
Currency traders said the market was also gearing up for the central bank's rate decision on July 9.
The Central Bank of Kenya cut its key lending rate by a bigger-than-expected 100 basis points to 8.50 per cent in May and market players said a bearish local currency and inflationary risks might point to a hold this time around.
In the debt market, bonds worth Sh4.3 billion were traded, up from Sh3.8 billion on Wednesday.