Tanzania: Stock Markets Insecurity Push Up Debt Trading

By Abduel Elinaza

DAR ES SALAAM Stock Exchange (DSE), debt market has continuously spiked in the last four months driven by

uncertainty on equity and money markets.

The DSE report showed that the secondary debt market activities have tripled in this year's quarter one, at what debt brokers termed as raising certainty on stock and money markets since last December and also raising of bond trading awareness.

And, brokers hope that when the stock market finally recovers it will not steal the thunder of bonds transactions since there is enough liquidity to keep both markets vibrant.

Orbit Securities Head of Research and Analytic, Imani Muhingo said he believed it was a combination of various factors that pushed the activities north in the first quarter.

"The central bank tightened the spread commercial banks can give in forex transactions, hence Treasury dealers in banks turned to [government] treasuries considering stocks are not attractive," Mr Muhingo said.

The DSE debt market recorded a historic level after increased three-fold from 171bn/- in Q1 last year to 484bn/-in Q1 this year.

Zan Securities Advisory and Capital Markets Manager Ahmed Nganya said bidding competition in the primary market pushed investors to buy bond in secondary markets.

"Investors are fleeing their funds into government bonds for safety during this difficult period of COVID 19 pandemic," Mr Nganya said.

The on-going uncertainties started since last December when imports slightly fell when coronavirus got serious in China are among the reasons.

Also goods traders, especially those in big markets like Kariakoo, were stranded with slight high liquidity than usual, these funds found two routes to government securities, directly from the traders, and from fixed deposits in commercial banks.

Furthermore stocks are rigid, which limits investment opportunities in financial markets hence investors turn to fixed income securities.

Mr Muhingo further said of recently the economy experiences an increased in awareness.

"There have been numerous seminars and campaigns undertaken by financial markets stakeholders including stockbrokers, the DSE and central bank, about Treasury securities," he said. Treasury bills auction held last week was the third bills auction in a row to get undersubscribed.

During the auction, the Bank of Tanzania (BoT) offered 107.2bn/-on four tenors. The public tender was less than half the offer, totaling 50.11bn/-, marking an under subscription rate of 53.25per cent.

"The public seems to be pushing back against lower yields by bidding less on the most dropping yield tenor, the 364 days.

The Bank of Tanzania has also been pushing back by taking less than what was bided just to maintain lower Treasury yields," Orbit Weekly Synopsis report showed.

Many market experts, according to indiatvnews.com, have it that like many other crises this too will pass and come to an end, but most important for the investors to keep in mind post the ongoing impact in the markets.

"They should maintain asset allocation discipline to avoid any heavy loss," the media house said.