Market rotations expose fragile momentum

EQUITY market activity regained momentum during the week ending September 19, with turnover rebounding as banking stocks once again reasserted dominance over the market’s flows.

This renewed activity was also reflected in price movements, with both the All-Share Index (DSEI) and the Tanzania Share Index (TSI) advancing by 8.02 points and 25.97 points, respectively, signalling a modest recovery in sentiment following weeks of uneven performance.

On the equity turnover front, activity remained concentrated. NMB and CRDB led as the week’s top movers, generating turnovers of 5.9bn/- and 5.37bn/-, respectively. Together, the two accounted for nearly three-quarters of all equity activity, 39.3 per cent for NMB and 35.6 per cent for CRDB.

Institutional flows and steady retail demand sustained liquidity in both counters, reinforcing their status as market bellwethers. They were followed by Jubilee Holdings Limited (1.15bn/-), KCB (1.03bn/-) and Tanga Cement (693.5m/-). Collectively, these five counters contributed 93.97 per cent of total turnover, once again highlighting the structural challenge of concentration risk.

On the price movement side, gains were scattered but significant in certain pockets. Tanzania Tea Packers (TTP) led the charge, rallying 6.45 per cent on renewed demand from investors positioning for consumer sector exposure.

Cement names also performed strongly, with Tanzania Portland Cement (+5.93 per cent) and Tanga Cement (+5.42 per cent) registering broad-based buying, underpinned by expectations of continued infrastructure spending and resilient demand.

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Mwalimu Commercial Bank climbed 4.26 per cent as retail flows sought opportunities in smaller banking names, while Jubilee Holdings advanced 3.23 per cent, extending its steady performance. In total, six counters recorded price increases, including CRDB, which gained 0.87 per cent on the back of its surge in turnover and trading activity. The downside, however, was more pronounced.

Mkombozi Commercial Bank fell sharply by -15.32 per cent, reversing part of its earlier rally, while Maendeleo Bank dropped -14.77 per cent, as investors reassessed valuations in light of recent price volatility. SWISSport (-6.28 per cent), DSE (-5.16 per cent), Afriprise (-4.12 per cent), DCB (-3.92 per cent) and NMB (-3.88 per cent) also came under pressure, contributing to a total of 11 counters ending the week lower.

The broad mix of losers suggests that while banking stocks dominated turnover, momentum was uneven, with investors rotating between names in search of value while locking in profits where rallies had stretched valuations. In fixed income, activity was more robust.

The bond secondary market registered a 39.44 per cent increase in traded face value, reaching 137.29bn/-. Government securities once again anchored the market, though corporate bonds also made an appearance.

Samia Bond, carrying a 12 per cent coupon and NMB’s 9.5 per cent corporate bond both traded, albeit in small volumes, 10m/- and 690,000/-, respectively, underscoring the relatively illiquid state of Tanzania’s corporate debt market compared to government paper.

Furthermore, BoT issued a notice for its upcoming 25-year Treasury bond auction scheduled for tomorrow (September 24). The auction will offer 264.31bn/- via the competitive window and 29.37bn/- via the non-competitive window. The most striking feature of this issuance was the coupon rate, set at 13.75 per cent.

This represents a 25-basis point cut from the 20-year bond auctioned earlier in the month, which carried a 14 per cent coupon and a full 125-basis point drop from the 25-year bond issued in August, which carried a 15 per cent coupon. For much of this year, the market has adjusted to the central bank’s gradual easing trajectory, with yields declining across both the primary and secondary markets.

Yet the sharp drop-in coupon rates over such a short period have taken many investors by surprise. Expectations were shaped, in part, by the issuance calendar for the first half of FY2025/26, which had indicated a reopening of the 25-year bond originally issued in August with a 15 per cent coupon.

While the calendar is indicative rather than binding, it plays an important role in guiding market sentiment. The abrupt adjustment to 13.75 per cent has likely unsettled expectations, raising questions about how aggressively the central bank intends to drive down yields.

The implications are twofold. On one hand, the lower coupon reduces the government’s cost of long-term financing and reinforces the downward trajectory of yields across the curve. On the other, the adjustment risks dampening investor enthusiasm for the auction, as institutions recalibrate their return expectations.

Demand is still likely to materialise, particularly from investors seeking to lock in long-term paper amid declining rates, but participation could be more selective.

For opportunistic investors, this dynamic presents both risk and potential. A softer bidding environment could allow participants to secure allocations at relatively attractive yields, particularly if the reduced competition limits upward bidding pressure.

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At the same time, the sharp recalibration of coupons underscores the need for vigilance. In short, the equity market displayed renewed activity but remains dependent on a narrow band of highly liquid counters, while the fixed income market continues to absorb abundant liquidity under a falling-rate environment.

The forthcoming 25-year bond auction will serve as a litmus test of investor sentiment, revealing whether the market fully buys into the central bank’s trajectory, or whether reduced coupons begin to test the limits of investor appetite for longdated Tanzanian paper.