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BoT pushes banks to lend by cutting govt securities yields

THE market was slightly bearish during the week that ended on 29th November 2019, after the Tanzania Share Index (TSI) lost a 0.18 point.

The TSI closed the week at 3,431.10 points compared to 3,431.28 points reported during the previous week.

The TSI retreat follows a 0.005 per cent decline in the domestic market capitalization which slightly fell to TZS 9,010.58bln ($3.917bln) from the previous week’s TZS 9,011.05bln ($3.918bln).

The slight decline of the domestic market capitalization is a result of a 2 per cent down movement on the Dar es Salaam Stock Exchange Plc (DSE: DSE) counter.

The price of DSE fell to 980/- per share during the week, compared to 1,000/- at the end of the previous week. The price of DSE goes down despite very lucrative quarterly results for the quarter ending September 2019.

The market seems to have priced in the fact that the Vodacom and Mirambo transaction, as a non-recurring activity, highly inflated the third quarter’s DSE results, part of the reason that we do not see a positive reaction in the DSE price.

Total equity turnover during the week has risen by 32.5 per cent to a total of TZS 3.4bln ($1.49mln) compared to TZS 3.14bln ($1.37mln) realized during the previous week.

This has been the trend for all of November which saw turnover rise by more than 300 per cent compared to October.

Similar to the previous week, CRDB (DSE: CRDB) maintained the top mover spot, accounting for 92 per cent of the total equity turnover realized during the week.

TBL counter is still dull, taking a back seat for the whole month of November. The All Share Index (DSEI) dropped off 24.8 points to close the week at 2,026.95 points.

The drop in the DSEI follows a 1.2 per cent drop in the total market capitalization after four cross-listed counters complemented DSE in the decline of the total market capitalization.

Cross-listed counters that went down are Kenya Airways (DSE: KA) which was the top loser after dropping by 15 per cent, East African Breweries Ltd (DSE: EABL) which dropped 4.4 per cent, National Media Group (DSE: NMG) down by 3.3 per cent and Jubilee Holdings Ltd (DSE: JHL) down by 2.5 per cent .

Kenya Airways is still dwindling since the government announced the decision to nationalize the airline to save it from mounting debt.

Uchumi Supermarket Ltd (DSE: USL) remained unchanged while KCB Bank (DSE: KCB) gained 0.9 per cent in the momentum of positive movement by listed banks in Kenya due to increased profitability and parliament’s decision to revoke the interest rate cap rule.

Foreign investors dominated both sides of the market during the week while remaining net sellers.

Foreign investors accounted for 90.4 per cent of the total investments in the market and 91.4 per cent of total divestments from the market respectively.

The net foreign outflow from the market stood at TZS 35mln ($0.015mln).

Money Market, Bills and Bonds

Transactions on the Interbank Money Market (IMM) went down by a massive 56.5 per cent during the week under review, after recording total transactions worth TZS 37.5bln ($16.3mln) compared to TZS 86.2bln ($37.48mln) traded during the previous week.

The interbank rate gained 34bps to close the week at 4.64 per cent.

Interbank rates have been on the declining trend during the month, recording a month to month slide of 40bps, from 5.04 per cent during the end of October. Interbank transactions were higher during November, recording a total of TZS 217.6bln ($94.6mln).

The amount is 1.87 per cent higher than that of October which recorded total transactions worth TZS 213.6bln ($94.86mln).

The weighted average yield to maturity (WAYTM) of Treasury securities is still on a declining trend from what looks like a deliberate move by the central bank to boost commercial banks’ lending to the public, as well as limiting the cost of borrowing for the government.

During the week, the Bank of Tanzania conducted an auction for Treasury bills with an offer worth TZS 107bln ($46.52mln).

The public tendered a total of TZS 168.49bln ($73.25mln) in 82 bids, marking an oversubscription rate of 57.47 per cent.

As the norm, the majority of bids fetched the 364days tenor, although the 182days tenor received a substantial tender relatively. The 35days and 91days tenors were not bid upon.

The Bank of Tanzania accepted a total of 66 bids worth TZS 90.5bln ($39.34mln).

The WAYTM dropped by 31bps to 5.82 per cent compared to 6.13 per cent reported during the previous auction conducted on 13th November 2019.

Currency Market

Activities on the Interbank Foreign Exchange Market (IFEM) spiked by 52 per cent after recording transactions worth $43.28mln, compared to $28.45mln traded during the previous week.

Similarly, the market recorded higher activities for November compared to October. November recorded total transactions worth $139.73mln, up 23 per cent from $113.5mln trade during October.

The weighted average exchange rate at the end of November was TZS 2,300.19, up 14 pips from the end of October’s TZS 2,300.33/USD.

Week on week, the shilling appreciated by 54 pips, from 2,300.73/USD at the end of the previous week.

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Author: Weekly Markets Synopsis

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