DSE Q1 2025: Indices gain amid mixed sector performance

DAR ES SALAAM: THE Dar es Salaam Stock Exchange (DSE) had a solid performance in the first quarter of 2025, with both the DSEI and TSI indices showing upward trends.

The DSEI, which tracks all listed stocks, gained roughly 7.0 per cent since the beginning of the year, hovering around 2,300 points by late March.

Similarly, the TSI, which measures the performance of local Tanzanian companies, also saw a 6 per cent increase, reaching around 4,830 to 4,850 points by the end of the quarter.

The total market capitalisation grew in parallel, reaching approximately 19.1tri/, signaling positive returns for investors in the first quarter. While the indices showed growth, the trading activity was not consistent throughout the quarter. After a strong start, market turnover and volumes decreased sharply in the final week of February, with a decline of over 60 per cent compared to the previous week.

This drop suggests periods of profit-taking and a cautious stance from traders. Despite this, local investors dominated market activity, making up the bulk of trades, while foreign investors were more selective, often acting as net sellers.

This mixed participation points to a market sentiment that, while optimistic due to strong fundamentals and solid earnings, remained wary of liquidity and external factors that could affect performance in the near term.

The first quarter also witnessed significant sectoral variations. The Banks, Finance & Investments (BI) sector led the market with impressive gains, primarily driven by strong performances from key players like CRDB and NMB banks.

These banks reported doubledigit profit growth, bolstered by expanding loan portfolios and healthy financial results. February was particularly strong for the banking sector, reminiscent of last year’s mid-quarter rally. By the end of Q1, the BI sector had posted a 13 per cent gain, underscoring the sector’s dominant role in the overall market.

In contrast, the Industrial & Allied (IA) sector experienced a more mixed performance. After a slow start in January, the IA index rebounded slightly in February, driven by key players like Twiga Cement and Tanga Cement.

However, rising input costs and increased competition kept gains in check and the index slipped in March. At the end of Q1, the IA sector gained a modest 1.0 per cent, reflecting mixed sentiment as investors await clearer signals regarding manufacturing output and commodity price trends in the second quarter. If large infrastructure projects gain momentum or if corporate earnings in this sector improve, it could lead to a more robust performance in the coming months.

The Commercial Services (CS) sector, which includes companies in retail, telecoms and transport services, struggled in the first quarter. The CS index saw slight declines early on and stagnated throughout March. Swissport Tanzania, a key player in airport ground handling, faced a slow recovery in aviation activity, contributing to the sector’s underperformance.

Similarly, telecom stocks like Vodacom Tanzania traded in a narrow range amid a competitive market environment. By the end of the quarter, the CS sector had remained largely flat, reflecting caution towards service-oriented companies in the current economic environment.

Several factors contributed to the DSE’s performance in Q1. Strong earnings reports from companies, particularly in the banking sector, were a key driver.

The strong performance of banks, which reported impressive profit growth and improved asset quality, provided a significant boost to market sentiment.

Additionally, Tanzania’s macroeconomic stability played a crucial role in supporting the market. Inflation remained within the central bank’s target range of 3-4 per cent and the Bank of Tanzania kept interest rates stable, ensuring a conducive environment for business growth.

This economic stability, coupled with steady GDP growth, helped reinforce investor confidence.

Liquidity remained abundant in the market, supported by a growing money supply and credit expansion of about 15-17 per cent year-on-year.

However, foreign investor sentiment was mixed, with foreign participation in the market relatively subdued due to global uncertainties, such as higher interest rates and geopolitical tensions.

Foreign investors contributed less than 10 per cent of the total buys, but accounted for nearly half of the sales during the quarter. Despite this, Tanzania’s stable shilling and attractive dividend yields in key sectors like banking continued to appeal to foreign investors, with potential for renewed interest should global conditions improve.

Looking ahead to the second quarter of 2025, the outlook for the DSE remains cautiously positive. Tanzania’s economy is expected to maintain its growth momentum, driven by infrastructure development and recovering consumer demand.

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Sectors such as construction, consumer goods and tourism are likely to see increased activity as infrastructure projects progress and post-pandemic recovery gains traction. This broader economic strength should feed into corporate earnings and contribute to a positive outlook for stocks across various sectors.

The banking sector, which performed well in Q1, is likely to continue its momentum. Strong private sector credit growth and improving loan quality should support ongoing profitability for key banks.

Mid-year dividend payouts could further enhance investor interest in the banking sector, especially if major banks report better-than-expected results. However, stock valuations are