The stock market ended the week on a positive note with total market capitalisation rising by 1.53 per cent.
Despite a slight dip in trading volumes, registering a turnover of 572.18m/-, a decrease of 17.49 per cent from the previous week, a number of stocks experienced price appreciation leading to the overall increase in market capitalization.
The top three trading counters, NMB, CRDB, and DCB, dominated the market with 74.89 per cent, 17.82 per cent, and 1.88 per cent of the overall market turnover, respectively. Investors can take comfort in the continued optimism in the market and the potential for growth in the future.
The stock market had a generally good performance last week with NMB leading the gainers with an 11.61 per cent increase to close at 3,460/- per share.
CRDB also saw a price increase of 3.85 per cent closing the week at 405/- per share. DSE gained 3.53 per cent to close at 1,760/- per share, while NICO appreciated by 1.67 per cent to close at 305/- per share.
On the losing side, TCCL/Simba suffered a 9.09 per cent decrease in value, closing the week at 1,000/- per share.
Total market capitalization went up by 1.53 per cent to 15.985tri/- and domestic market capitalization went up by 2.08 per cent closing at 10.534tri/-.
Key benchmark indices
- Tanzania share index (TSI) closed at 3,985.1 points increasing by 0.63 per cent.
- All Share Index (DSEI) closed at 1,918.09 points increasing by 2.08 per cent.
Sector Indices
- Industrial and Allied Index (IA) closed at 5,031 points, down by 0.11 per cent from the previous week.
- Bank, Finance and Investment Index closed at 3,692.1 points, up by 8.12 per cent.
- Commercial Services Index closed at 2,147.73 points, remained unchanged from the previous week.
Debt Market
Primary market
The recent 10-year Treasury bond auction held on February 1, 2023 by the central bank saw a total amount of 133bn/- offered and a total tendered by investors of 74.958bn/-. The central bank accepted 64.456bn/-, with a weighted average yield to maturity increasing by 28 basis points to
11.0548 per cent.
Despite the auction receiving a low subscription rate of 56.3 per cent, the higher yield reflects the central bank’s tight monetary policy, which is causing yields to climb higher.
Furthermore this indicates that the demand for medium-tenured bonds is lower, leading to higher yields to attract investors. The yield curve, which represents the relationship between yields and maturity, is expected to steepen as a result.
However, it is important to note that the increase in yields should be viewed optimistically, as it suggests that the economy is strengthening, leading to higher borrowing costs for the government.
In conclusion, the recent 10-year Treasury bond auction highlights the central bank’s efforts to maintain a stable economy, with the increase in yields reflecting the strength of the economy. This will lead to a steepening of the yield curve, which should be viewed positively, as it signals growth and investment opportunities.
Secondary market
Trading activities increased for the week ending February 3, overall turnover for the week increased by 47.86 per cent from 61.31bn/- registered in the previous week to 90.6543bn/-. The number of trades decreased from 55 trades recorded in the previous trading week to 39 trades.
Overall tenures traded were predominately on the long end of the yield curve, with the 20 year accounting for 86.59 per cent of the traded volumes.
Outlook
Stock market
The optimistic sentiment in the market is a reflection of the overall positive economic outlook and growth potential of the country. Investors are drawn to the favourable investment climate and the prospects for returns in the stock market.
Despite the slight decrease in trading volumes, the market continues to exhibit resilience and stability.
The recent price appreciation of stocks is a testament to the confidence of investors in the market, and it is expected to continue in the coming weeks. With earnings season in full swing, investors are closely watching the financial results of companies, which could further boost the market’s upward trend.
In conclusion, the stock market continues to be a promising investment destination for investors seeking long-term growth. Despite some short-term volatility, the overall trend remains positive, and investors can expect continued growth in the coming weeks. The market’s stability, investor confidence, and positive economic outlook provide a solid foundation for future growth, making it an attractive investment opportunity for those seeking to diversify their portfolios.
Fixed income market
The Monetary Policy Committee (MPC) held its meeting on 30th January 2023, in its statement, the MPC announced its decision to maintain a less accommodative monetary policy stance in January and February 2023. The main objective of this stance is to control inflationary pressures and promote sustainable growth of economic activities.
The announcement of a less accommodative monetary policy stance is expected to result in a trend of upward movement in Treasury yields.
This, in turn, is likely to have a slight negative short term impact on current bondholders. Bond yields and prices move in opposite directions, so as yields increase, prices will decrease, providing current bond holders with capital losses.
Additionally, a rise in yields can attract new investors to the bond market looking to capitalize by acquiring bonds on the cheap.
While the shift in monetary policy may cause some uncertainty in the short term, it is important to note that a rise in yields is a reflection of a strong and stable economy.
