DSE foreign inflows drop further in March

THE Dar es Salaam Stock Exchange (DSE) experienced a further drop in foreign inflows last month, as a result of the ongoing global economic uncertainties.

The foreign inflows decline trend began mid-last year and investors are still wary of emerging markets’ uncertainty after the failure of three banks in the US during the month.

The foreign inflow last month was 0.24 million US dollars while the foreign outflow was 0.32 million US dollars, creating a net foreign outflow of 0.08 million US dollars.

Alpha Capital Head of Research and Financial Analytics, Mr Imani Muhingo said the US banks’ failure added fuel to the fire, while the Federal Reserve maintained a rate hike, though at a slower pace, as inflation slows down.

“Fed rate hikes have sent shock waves in dollar availability throughout the world, especially emerging economies, leading to a mass outflow of foreign portfolio investments (FPIs),” Mr Muhingo told the ‘Daily News’ yesterday.

Foreign investment to the bourse last month was 12.2 per cent of the total investments into DSE, while foreign divestments were 16.4per cent.

Additionally, foreign participation has significantly dropped on a monthly basis from foreign activities accounting for 21.3 per cent and 11.8 per cent of investments and divestments respectively, with a net foreign inflow of 0.35 million US dollars in February.

Tanzania Cigarette Company (TCC) Chairman, Mr Paul Makanza worried about the lack of US dollar liquidity in the economy that may affect the price of imported raw materials negatively.

“A lack of US dollar liquidity in the domestic market could affect the price of imported raw materials and production costs,” Mr Makanza said in the firm latest financial statement.

Bank of Tanzania’s (BoT) latest monthly economic review showed the stock of foreign exchange reserves declined by almost 28 per cent to 4.577 billion US dollars at the end of February from 5.858 billion US dollars at the end of last February.

“The reserves were sufficient to cover 4.1 months of imports, in line with the country benchmark of at least 4 months,” the BoT report said.

Nevertheless, Vertex International Securities, Advisory and Capital Markets Manager, Mr Ahmed Nganya said a crisis of confidence in the global banking sector, which loomed over mid-last month has waned as the industry seems to have stabilised.

“We think this might allow frontier investors to regain confidence and therefore increase their participation (on DSE),” Mr Nganya said.

Globally, according to Zan Securities said, investors are still weighing the risk to financial stability in response to the recent banking crisis.

“We see major central banks moving away from a “whatever it takes approach” to tame inflation, to a more cautious phase protecting market stability,” Zan Securities’ latest weekly report, Market Wrap-ups, said.

Recently, the International Monetary Fund called for greater vigilance over the global financial system which might translate to greater vigilance by global central banks in response to rate hikes.

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