DSE rally extending as investors eye bank stocks, bond yields

DAR ES SALAAM: THE Dar es Salaam Stock Exchange (DSE) is expected to sustain its upward trajectory this week, supported by strong investor appetite for banking stocks amid expectations of resilient earnings and attractive dividend returns.

According to the latest weekly market wrap issued by Zan Securities, investor confidence remains firmly anchored in blue-chip banking counters, particularly CRDB Bank Plc and NMB Bank Plc, which are projected to continue dominating market turnover and trading volumes.

“Blue-chip banking counters, specifically CRDB and NMB, will likely continue to dominate market turnover and trade volumes due to highly attractive dividend yields and expectations of resilient corporate earnings,” the report said.

The brokerage firm, however, noted that the market could continue facing pressure from foreign investor exits after net foreign outflows surged to 13.70bn/- during the previous trading week.

“Persistent negative foreign investor sentiment, evidenced by a sharp jump in net foreign outflows to 13.70bn/- , will continue to exert downward pressure on large-cap counters,” Zan Securities said. Despite the foreign selloff, the report observed that domestic institutional and retail investors have continued absorbing the excess supply, helping stabilise the market and sustain the ongoing rally. “The pace of the market rally will heavily depend on the capacity of domestic institutional and retail investors to continue absorbing this foreign supply, as they successfully did this past week,” the report said.

Analysts also expect increased volatility in some relatively illiquid counters as investors engage in selective profit-taking.

“Expect localised downward pressure and price volatility in minor or relatively illiquid counters due to selective profit-taking and weaker overall demand,” the report noted.

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Meanwhile, activity in the fixed income market is pointing to a more cautious investor stance, with secondary market turnover declining sharply by 53.9 per cent despite the number of deals remaining relatively stable.

“This indicates institutional investors are stepping back from large-sized transactions and adopting a temporary ‘wait-and-see’ approach,” Zan Securities stated.

The report said investor attention is now shifting toward upcoming primary market auctions and broader liquidity conditions in the financial system. Institutional investors are also expected to maintain strong interest in long-term government securities, especially 20-year and 25-year bonds, in a move aimed at locking in attractive yields.

“For investors active in the secondary space, preference will remain heavily concentrated in long-dated government securities,” specifically the 20-year and 25- year tenors, as market players aggressively move to lock in lucrative yields, the report said.

At the Treasury bills market, continued oversubscription across all maturities is expected to place further downward pressure on yields in forthcoming auctions. “Ample market liquidity and massive oversubscriptions across all T-bill tenors, ranging from 210 per cent to 328 per cent, point toward a continued downward trajectory for primary yields in upcoming auctions,” Zan Securities said.