CRDB Bank (DSE: CRDB) was the stock of the week in terms of returns and turnover.
The bank was the top mover, accounting for 40.5 per cent of the total equity turnover realized during the week that ended on the 14th February 2020. The price of CRDB grew by 28.5 per cent from 140/- during the previous week to 180/- at the end of the week under review.
The price of CRDB has almost doubled since the beginning of the year, after closing the year 2019 at 95/-. As a result of a gain on CRDB counter, the Tanzania Share Index (TSI) gained 39.79 points to close the week at 3,514.17 points.
The domestic market capitalization grew by 1.15 per cent week on week, from 9.12tri/- ($3.96bln) during the previous week to 9.22tri/-($4.01bln). Equity turnover realized on the exchange slowed down by 95 per cent strictly due to reduced activities on the TBL counter.
Total weekly equity turnover dropped from 9.89bn/- ($4.3mln) during the previous week to 472.4m/- ($0.21mln) while the volume of shares traded dropped by 54 per cent to 1.4mln shares. The most active counters were CRDB, followed by DSE and TBL which accounted for 30 per cent and 20 per cent of the total weekly turnover.
The All Share Index (DSEI) lost 9.49 points to close the week at 2,120.90 points while the total market capitalization closed the week at 17.60tri/- ($7.66bln), 0.45 per cent down compared to the previous week. The drop of the DSEI was a result of a decline in prices on KCB, NMG and EABL by 5 per cent, 2.5 per cent and 0.4 per cent, respectively.
Local investors were dominant of the market during the week, corresponding with the dominance of CRDB on the turnover. Local investors accounted for 98.66 per cent of both, investment and divestment, while foreign investors accounted for the balance.
Money Market, Bills and Bonds
The interbank rate on the Interbank Money Market (IMM) gained 26bps complemented by a 39.5 per cent slowdown in trading activities. The weekly total traded on the IMM was TZS 109.5bln ($47.59mln) while the interbank rate rose to 4.13 per cent.
There has been variations in activities on the IMM as the banking sector catches momentum. Credit growth to the private sector grew to 11.1 per cent during December 2020, highest in the last three years, while liquidity in the banking sector maintains stability.
Investors’ appetite on the 20 years Treasury bond is seen increasing as the auction held on 12th February 2020 was oversubscribed by 285 per cent. The Bank of Tanzania offered the 20 years Treasury bond worth 117bn/- ($50.85mln) while the public raised a total tender size of 450.88bn/- ($195.95mln) from 566 bids up from 443 bids during the previous auction.
The Bank of Tanzania accepted 208 bids worth 113.55bn/- ($49.35mln) which was 3 per cent lower than the offer size. The minimum successful price jumped 300bps to 95.1534 while the highest bid price jumped 484bps to 98.8450.
The spread between the lowest and highest successful bid prices has been tightening over the auctions from 1,794bps during the first 20 years T-bond in September 2018 to 1,042bps during the auction under review, signaling an increasing demand from investors.
The weighted average yield to maturity (WAYTM) fell by 46.3bps to 16.76 per cent as the Bank pushes to limit the cost of debt for the government while suppressing interest rates in the process. Considering the amount of demand, we expect a further decline of WAYTM and possibly bids at par.
The shilling has depreciated by 6 pips week on week on the Interbank Foreign Exchange Market (IFEM), reaching the lowest point since June 2019. The depreciation is seasonal as it marks a third consecutive week. Foreign inflows are minimal during the first quarter due to seasonal slowdown of traditional exports and tourism.
High inflows are expected when summer begins, influencing tourism in the West. The shilling closed the week at a weighted average exchange rate of TZS 2,300.96/USD, down 99 pips since the beginning of the year. The total weekly turnover on the IFEM grew by 51 per cent to $11.18mln compared to $7.4mln.
The Monthly Economic Review for December 2019 by the Bank of Tanzania suggests there to have been an excess of foreign currency in the banking sector after the Bank mopped up 117 million or rather injected 269bn/- along with a net injection of 49bn/- ($21.34mln) through reverse repo sales.
Foreign reserves maintained at 5.5 billion US dollars similar to November, while Balance of Payment surplus went down 20.24 per cent from 702.5 million US dollars to 560.3 million US dollars.
Although still stable at 3.7 per cent during January 2020, demand-pull inflation, potentially from desert locust crisis and the corona virus, poses a slight risk on the shilling’s stability.