NMB, Simba suffer price slide pre-Easter

The Dar es Salaam Stock Exchange (DSE) registered slightly decreased activities for the trading week ending April 7.

Turnover for the week amounted to 1.562bn/-, a decrease of 9.56 per cent from the previous week, albeit a number of listed stocks experienced price gains leading to the overall increase in market capitalization by 0.18 per cent.

The top three trading counters, DSE, CRDB Bank, and NMB Bank, dominated the market with 78.13 per cent, 10.12 per cent, and 4.33 per cent of the overall market turnover, respectively.

Four domestic counters registered price gains within the week, TICL leading the gainers with a 7.14 per cent increase to close at 150/- per share. CRDB also saw a price increase of 5.25 per cent closing the week at 500/- per share. TPCC registered an increase of 1.49 per cent closing the week at 4,100/- per share.

Alternatively, on the loser’s side TCCL/Simba lost 7.81 per cent of its value closing off at 1,180/- per share, and heavily weighted NMB lost 1.71 per cent of its value closing off the week at 3,440/- per share.

Total market capitalization went up by 0.18 per cent to 15.769tri/- and domestic market capitalization went up by 0.38 per cent closing at 10.856tri/-.

Key benchmark indices

• All Share Index (DSEI) closed at 1,892.16 points increasing by 0.18 per cent.
• Tanzania Share Index (TSI) closed at 4,107.04 points increasing by 0.38 per cent.

Sector Indices

• Industrial & Allied Index (IA) closed at 5,088.64 points, up by 0.08 per cent.
• Bank, Finance & Investment Index closed at 4,001.16 points, up by 1.16 per cent.
• Commercial Services Index closed at 2,160.37 points, unchanged from the previous week.

Debt Market

Primary market

On Wednesday 05th April 2023, the Central Bank was in the market offering 180bn/- to investors for a new 25-year Treasury bond offering a 12.56 per cent coupon rate annually.

This auction was catered to investors with more preference for long-term papers. The auction received a high subscription rate of 176.7 per cent further receiving bids totaling 318.05bn/- ultimately the central bank accepted bids worth 280bn/-.

It has been quite the norm for the 25-year bond being oversubscribed, receiving a high number of bids and tendered amounts indicating more demand in this maturity. This has made it a favorite hub for the transmission of monetary policy by the central bank.

The central bank has accepted more than the amount initially offered in the last three auctions in a bid to remove excess liquidity as a measure to control inflation.

High inflation triggers interest hikes by central banks which affect more long-dated bonds because of their high duration. Ahead of the March inflation figure, investors bid low to seek excess yields and offset any potential effect on bonds from inflation.

The weighted average yield to maturity has gone up by 4.8 basis points relative to the previous auction held last month from 12.9606 per cent to 13.0086 per cent.

Average yields have been increasing over the last four auctions gaining cumulative 57.78 basis points from the average yield in July 2022. Moreover, the price floor gradually reached 94/50 from 100/- in the same period. This continues to reflect lessened monetary policy accommodation by the central bank to control inflation.

Secondary market

Trading activities decreased for the trading week ending April 7. Overall turnover for the week decreased by 84 per cent from 75.08bn/-registered in the previous week to 11.82bn/-.

Moreover, the number of trades decreased from 38 trades recorded in the previous trading week to 19 trades. Most of the market liquidity was directed towards the 25-year auction-reducing activities in the secondary market; however, we expect volumes to increase in the coming week.

Overall tenures traded were predominately on the mid-segment of the yield curve, with the off-the-run 7 year and 10-year accounting for 94.9 per cent of the traded volumes.

Corporate bond activities were on a high note during the trading week, NMB bond was the sole traded corporate bond registering an aggregate volume of 65m/-.

We expect trading activities to increase next week as there will be no Treasury bond auction to pull liquidity.

Outlook

Domestically, markets wrapped up a volatile but positive first quarter. Equities turnover in the bourse increased by 10 per cent to 20.4bn/-Q1 2023 compared to 18.5bn/- registered in Q4 2022.

Banks dominated traded volumes within the quarter as investors have their eyes pegged on increased dividends off the back of impressive results released by some companies. CRDB, NMB, TPCC, TCCL, and NICO accounted for 97.3 per cent of the total equity market turnover.

Bond yields continued to push higher throughout Q1 2023 on expectations of further central bank tightening. The push is not expected to sustain, however, due to lessened inflationary expectations.

Globally, amid higher interest rates, economic uncertainty and most recently banking sector turmoil many investors have moved into higher-than-typical allocations to cash or short-term government bonds. Banking-contagion concerns have receded more-so leading to a sharp pullback in shares of regional banks, large banks, and value-style investments more broadly in the US, it was also a catalyst for the tech sector and other growth segments of the market to reassume stock-market leadership.

Our outlook for global markets is that financial stability concerns will likely end up pulling forward the end of the US Federal Reserve tightening campaign, further central banks are expected to be pragmatic in tightening conditions.

Mr Masumbuko is a Chief Executive Officer of Zan Securities—a capital markets and securities authority licensed dealer and a member of the DSE. raphael.masumbuko@zansec.co.tz