Stock Market:
THE Dar es Salaam Stock Exchange (DSE) had a successful week, with a 29% increase in turnover, from TZS 1.2 billion to TZS 1.5 billion. The volume of traded shares also doubled, from 2.6 million to 6 million. The market capitalization at the end of the week was TZS 15.5 trillion.
Local investors played a significant role in driving activity on the DSE, accounting for 88% of share purchases and 96% of sales. Global market uncertainties and fears of recession have deterred foreign investors from investing in frontier markets such as the DSE, leading many to redirect their capital back to developed markets as risk aversion increases.
Additionally, the All Share Index, which includes both domestic and cross-listed stocks, lost 4.64 points after several counters ended the week in negative territory.
In the cross-listed segment, East Africa Breweries Limited (EABL) and KCB closed the week down 0.6% and 1.4%, respectively, while Jubilee Holdings’ (JHL) share price increased by 2%. Domestic stocks that struggled during the week included TICL, whose share price decreased by 3%. Other underperforming stocks included NICOL, TOL, and Maendeleo Bank (MBP), which closed the week down 1.5%, 1.4%, and 1.2%, respectively.
DSE, which is self-listed, emerged as the top-performing stock of the week, closing 6% higher. In recent years, the stock has consistently delivered double digit returns for investors. In an unusual occurrence, TICL accounted for approximately 46% of total turnover and 71% of total volume.
Despite a 56% decrease in its share price year to date, risk-seeking investors are accumulating positions in the stock with the hope of catching a bottom.
Buying at the bottom refers to the practice of purchasing a stock at a low price in the hope that the price will rise in the future. It is a strategy that requires careful consideration and a willingness to take on risk, as there is no guarantee that the price of a stock will increase.
However, some investors, such as the renowned Warren Buffet, have had success with this strategy. It was a difficult week for depositors and investors of YETU Microfinance Bank as the Bank of Tanzania announced that it was placing the bank under statutory administration due to its inability to meet regulatory requirements for liquidity and capital adequacy.
This news has likely caused concern among depositors and investors as it suggests that the bank may be facing financial difficulties. It is important to note that statutory administration is a measure taken by regulatory authorities to protect depositors and ensure the stability of the financial system.
As a result, YETU will not be conducting normal business for up to 90 days while the Bank of Tanzania determines a suitable resolution plan. YETU was listed on the Dar es Salaam Stock Exchange (DSE) in 2016 through an initial public offering (IPO) at TZS 500 per share.
However, the stock currently trades at TZS 510 per share and is among the least liquid counters, falling short of initial expectations. Not everything was negative for the Tanzanian financial market, as the country ranked 11th in the 2022 Absa Africa Financial Markets Index.
The index evaluates a country’s financial development based on measures of market accessibility, openness, and transparency, and has become a benchmark for the investment community to assess African countries’ market infrastructure.
The Bank of Tanzania’s efforts to liberalize capital controls and NMB Bank’s issuance of the first social bond were crucial in securing Tanzania’s position.
South Africa, Mauritius, and Nigeria took the top three spots, while Uganda and Kenya ranked fourth and eighth, respectively.
GOVERNMENT SECURITIES
The Bank of Tanzania held a treasury bill auction last Wednesday. Only the 364-day tenor treasury bill was offered at the auction, while other tenors such as the 35, 91, and 182 days remained nullified.
During the auction, the bank aimed to raise 77.2 billion Tanzanian shillings (TZS) but ended up raising only TZS 44.08 billion. Investors pushed the yield, or the return they receive on their investment, to 6.33%, 24 basis points higher than the previous average weighted yield of 6.09%.
This week, the Bank will hold a bond auction for a 25-years bond that pays a 12.56% annual coupon. The 25-year bond has been a popular choice among retail and institutional investors due to its lucrative coupon rate.
As an investment, bonds offer a reliable source of income and are generally considered to be a lowerrisk option compared to stocks or other securities.
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