DSE returns to bull ran

Activities on the Dar es Salaam Stock Exchange (DSE) increased for the second week running.

Turnover for the week amounted to 3.9bn/-, an increase of 48.20 per cent from the previous week. General market was in bullish mode leading to an increase in both total and domestic market capitalisation.

The top three trading counters within the week were, TBL, CRDB, and NMB, dominating the market with 57.44 per cent, 27.42 per cent, and 10.41 per cent of the overall market turnover, respectively.

Four counters registered price gains within the week, Simba Cement (TCCL) leading the gainers as the Scancem acquisition seems imminent.

Simba cement registered 28.38 per cent gain within the week closing at 1,900/- per share, SWISS gained 6.49 per cent per week ending the week at 1,640/-. NICO as well registering a 2.5 per cent gain within the week closing at 410/- per share, lastly CRDB registered a 2.04 per cent increase within the week to close at 500/- per share

On the loser’s side, DCB Bank dropped by 2.63 per cent closing off the week at 185/- per share.

Total market capitalisation increased by 2.12 per cent to 15.151tri/- and domestic market capitalisation increased by 0.52 per cent closing at 10.934tri/-.

Key benchmark indices

• All Share Index (DSEI) closed at 1,816.97 points increasing by 2.12 per cent.
• Tanzania Share Index (TSI) closed at 4,133.050 points increasing by 0.52 per cent.

Sector Indices

• Industrial and Allied Index (IA) closed at 5,128.51 points, up by 0.46 per cent.
• Bank, Finance and Investment Index closed at 4,029.69 points, up by 0.82 per cent.
• Commercial Services Index closed at 2,161.21 points, down by 0.20 per cent.

Highlights: Debt Market

Primary market

On Wednesday 17th May 2023, the central bank was in the market offering 103bn/- to investors for a new 5-year Treasury bond offering an 8.6 per cent coupon rate annually.

This auction was catered for investors with more preference for medium-term papers.

The auction was subscribed by 46.17 per cent – the auction received bids totalling 47.55bn/- and accepted bids worth 44.15bn/-.

The weighted average yield to maturity has gone up by 17.87 basis points relative to the previous auction held on January 4th 2023 from 9.6670 per cent to 9.8457 per cent.

Average yields have been on an upward trend over the last four auctions gaining 90.77 basis points from the average yield in May 2022. Moreover, the price floor has reached 92.4 from 96.5 in the same period.

This continues to reflect lessened monetary policy accommodation by the central bank to taper inflation.

This 5-year Treasury bond had been undersubscribed, as were the previous two 5-year auctions. This reflects investor’s current appetites for long tenures such as the 25-year Treasury bond due to its higher cash flow appeal.

Additionally, the recent increased stock market activity can also explain the low auction subscription as higher-risk investors’ shift to equities.

Secondary market

Market activities were elevated during the week, the overall turnover for the trading week ending May 19 increased by 114 per cent from 61.68bn/-registered in the previous week to 132.34bn/-.

Moreover, number of trades increased from 45 trades recorded in the previous trading week to 58 trades.

Overall tenures traded were predominately on the long end of the of the yield curve, the on-the-run 20-year T-bond accounting for 45.33 per cent of the traded volume.

There was a fixed income trade during the week involving a NMB corporate bond with a notional value of 6.0m/- and an average price of 85/94.  We expect secondary trading activities to remain elevated in the coming weeks.

Inflation

Inflation rate drops to 4.3 per cent after slightly going down by 0.4 percentage points in April, after the prices of some food and non-food items slightly declined.

The national bureau of statistics (NBS) statement on Wednesday showed that inflation dropped to 4.3 per cent from 4.7 per cent in March.

Impact

The decline in the inflation rate might be a positive sign that the government’s efforts to contain and maintain the inflation rate are working. This creates favourable conditions for investment for both international and domestic investors.

Outlook

Domestically, we understand equities strategies for 2023 should be focused on companies with solid fundamentals, which will show more growth. From a macro- economic perspective, low inflation and resilient cost pressures will be key drivers to compliment the quality of Tanzania equities. Given the strong growth environment in the companies are expected to increase top line and bottom-line growth relative to FY 2022.

In the short-term we might see slight volatility in the weeks ahead as companies begin to exercise their corporate actions.