Tanzania: Tsi Remains Strong for Third Consecutive Week

By Weekly Markets Synopsis

THE Tanzania Share Index (TSI) remained bullish for a third consecutive week following a 0.54 per cent gain on the

domestic market capitalization.

The TSI at the end of the week that ended on 31st January 2020 was 3,464.43 points while the domestic capitalization stood at 9.098tri/-. The TSI gained 33.33 points since the beginning of the year to the end of January, while the domestic capitalization grew by 0.97 per cent.

The rally on the TSI and domestic market cap originates specifically from the rally on the CRDB counter. The price of CRDB gained 18.18 per cent, moving from 110/- to 130/- during the week under review. The rally on CRDB was fueled by the bank's annual results which reported 87 per cent growth in profits.

The profit gain of CRDB was a result of increased interest income by 9.4 per cent as deposits and loan portfolio grew by 10.9 per cent and 8.4 per cent respectively. Interest expenses fell as the bank increases focus on retail customers who provide cheap deposits and take expensive loans while historically having highest payback ratio.

CRDB moved 1.1mln shares during the week, realizing a turnover 139.55m/-. CRDB accounted for 4.9 per cent of the total turnover realized during the week. CRDB closed the week with outstanding bids of more than 9mln shares while there was zero offers.

Bids keep mounting due to restrictive price determination rules by DSE which do not allow price movement of more than 10 per cent in a single trading session.

The result is investors are willing to pay than the highest accepted price of 140/- and holders believe that they can sell at more than what is allowable in the market while the market rules cannot accommodate both, hence a price limbo.

In Kenya and Uganda, price restrictions are removed during corporate events announcements, especially releases of financial statements. May be it is high time we adopt a similar approach. Apart from CRDB, NMB also had a good year during 2019.

NMB grew profits by 52 per cent mainly as a result of a 28.5 per cent decline in impairment expenses and increased non-interest income by 14 per cent. Interest income slightly grew by 4 per cent while interest expenses went up 17 per cent.

Despite a significant increase in profits, NMB counter remained quiet during the week. The main reason for the rigidity on NMB counter is similarly the trading rules. The total turnover realized during the week was 2.86bn/-, down 84 per cent compared to the previous week. The total volume during the week was 1.6mln shares.

TBL remained the top mover, accounting for 88.7 per cent of the total realized equity turnover during the week. TBL moved 317,350 shares most through off market block transactions at a price of 8,000/- despite TBL long standing market closing price of 10,900/-.

The All Share Index (DSEI) gained 21.76 points to 2,112.77 points following a 1.04 per cent increase in the total market capitalization. The growth on the total capitalization results from an increase in cross listed prices led by NMG which grew by 3.8 per cent. Foreign investors dominated the market while remaining net sellers.

Foreign investment accounted for 82 per cent while foreign divestment accounted for 88.5% of the total divestments. Local investors accounted for the balance. Money Market, Bills and Bonds Interbank Money Market (IMM) transactions lowered by 55 per cent during the week as the month comes to an end.

The total value of transactions totaled to 51bn/-from previous week's 113bn/-. The total value of transactions during January 2020 slightly went down by 12.14 per cent to a total of 423.4bn/- from December's total of 481.9bn/-. The weighted average interbank rate gained 15bps to 4.15 per cent.

The same is a gain of 41bps from the end of December. The Bank of Tanzania offered 109bn/- worth of 15 years Treasury bond during an auction held on 29th January 2020. The bank received 140 bids worth 189.59bn/-at a lowest and highest bid prices of 84.9277/- and 92.2479/- respectively.

The Bank of Tanzania accepted only 47 bids worth exactly the offer amount of 109bn/-at a minimum successful price of 89.75/-.

Similar to the trend in other Treasury securities, the weighted average yield to maturity (WAYTM) dropped by 5bps to 15.19 per cent compared to 15.24 per cent realized during the previous 15 years Treasury bond auction held on the 4th of December 2019.

The bond under review shall mature on 30th January 2035. Currency Market Activities on the Interbank Foreign Exchange Market (IFEM) almost halved during the week, after dropping by 47 per cent. The total value of transactions was 8.8 million US dollars compared to 16.6 million US dollars traded during the previous week.

The week was characterized by sort of a liquidity crunch as the value of transactions dropped while the week on week exchange rate variation was the highest on the downside since early 2019. The weighted average exchange rate rose by 94 pips to TZS 2,300.83 compared to TZS 2,299.89/USD.

On a month to month basis, the shilling depreciated by 86 pips since the end of December whiles the total value of transactions dropped by 61 per cent. The total value traded during January was 69.45 million US dollars compared to 177.65 million US dollars traded in December. The exchange rate at the end of December was TZS 2,299.97/USD.