Foreign investors in equity market recorded a historic 200bn/- net outflows during the first two and a half months of the current quarter, signaling a major shift in capital flows and increasing local ownership of listed companies.
The market report from the Dar es Salaam Stock Exchange (DSE) shows that foreign investors sold shares worth 207.3bn/- during the first two and a half months of the quarter, equivalent to 41.2 percent of the total value of shares sold, while their purchases amounted to only 7.4bn/-, representing 1.48 percent of total shares bought.
“Large equity sales by foreign investors generally indicate portfolio rebalancing, capital outflows, or changing global risk sentiment. However, when local investors step in to absorb the shares, it can also reflect strengthening domestic investment capacity,” said a market analyst.
According to the report, the largest sell-off by foreign investors was concentrated in banking, finance and investment, as well as industrial and allied counters.
The analyst noted that the capacity of local investors to absorb shares offloaded by foreign investors has continued to grow, driven mainly by institutional investors, collective investment schemes and a rising number of individual investors participating in the market.
Market analysts say the trend also reflects the increasing influence of institutional investors, which have accumulated substantial investable funds over the past decade.
“These institutions have become an important stabilising force in the market. Their long-term investment horizon allows them to absorb supply from foreign investors without causing significant volatility,” another analyst said.
Analysts also attribute part of the foreign outflows to global investment dynamics rather than domestic economic conditions.
“Foreign investors often rebalance their portfolios based on global interest rate movements and currency considerations. When yields in developed markets rise, some funds tend to shift capital away from frontier markets to safer assets,” the analyst explained.
Despite the foreign sell-off, the market has remained resilient as local investors continue to expand their participation.
Since the start of the quarter in January, the market has recorded total turnover of 503.5bn/-, more than three times the value recorded during the fourth quarter of last year and more than four times the level recorded during the first quarter of the previous year.
Total market capitalisation has climbed to 34.5trn/- as of March 13, compared to 19.2trn/- recorded at the end of March last year, reflecting strong gains in share prices.
Domestic market capitalisation has also nearly doubled to 23.8trn/-, up from 12.9trn/- recorded during the same period last year.
The surge in both total and domestic market capitalisation has largely been driven by rising share prices, particularly among local and cross-listed banking stocks, led by CRDB Bank Plc, NMB Bank Plc, and KCB Group Plc, which together account for more than 60 percent of the market’s total value.
As of the end of last week, CRDB remained the largest counter with a market capitalisation of 7.6trn/-, followed by NMB at 7trn/-, while cross-listed KCB ranked third with 5.3trn/-.
The sharp increase in banking share prices has also lifted the Banking Index (BI), which closed at 19,604 points at the end of last week, compared to 6,558 points recorded at the end of March last year.
Meanwhile, the Tanzania Share Index (TSI), which measures the performance of locally listed companies, also posted strong growth over the past 12 months, closing at 8,786 points last Friday, up from 4,882 points recorded at the end of March last year.
Analysts say the strong performance of banking stocks reflects improved profitability, strong credit growth and expanding digital financial services across the sector.
They also note that if the current trend continues, the market could gradually transition toward greater domestic ownership, reducing reliance on foreign portfolio flows while strengthening the resilience of the country’s capital market.
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