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Dar exchange indices gains despite turnover dip

Stock Market

THE market was on the green during the week that ended on 30th July 2020 as both indices gained points despite a dip in equity turnover.

The Tanzania Share Index (TSI) gained 5.1 points from appreciation of two counters, CRDB and NICOL. The TSI closed the week at 3,471.91 points. The DSEI closed the week at 1,800.16 marking a gain of 3.64 points following a 1.35 per cent gain on the KCB counter. Due to its heavy weight, the gain on KCB was enough to offset the 12 per cent shrinking on NMG and 1.94 per cent on JHL.

CRDB closed the week at a price of 145/- from 140/- during the previous week after moving 468,127 shares at a price of 145/-. CRDB was the top mover of the week after accounting for 78 per cent of the total equity turnover. Price appreciation and activities on the CRDB counter were influenced by the quarterly results released during the week, which were better than expectations.

According to the results, most banks were not only resilient but somewhat prosperous during the second quarter despite the challenges posed by the coronavirus. CRDB and NMB collectively have seen their loan books gain TZS 231.5bln ($100mln) in three months beginning April 2020. Collectively, the total assets of both banks grew by TZS 1.21trn ($525mln) while they collectively accumulated TZS 1.06trn ($459mln) as new deposits in three months, outstanding.

NMB posted a y-o-y profit growth of 65 per cent for the first six months of the year 2020 compared to a similar period in 2019 while the profit of CRDB grew by 16 per cent. What was even more remarkable is the growth of interest income and a substantial decline in impairment charges for both banks, despite business challenges during the Covid-19 period.

At a price of 145/- CRDB is trading at a P/E ratio of 2.9x trailing twelve months. What this means is, ceteris paribus, at its current business pace, it would take 2.9 years for CRDB to generate net profits equivalent to its current market capitalisation, what a bargain. Comparatively, the P/E ratio of NMB trailing twelve months is 6.3x.

Equity turnover took a dip during the week as TBL went silent, leaving the top mover spot to CRDB. Turnover dropped by 81 per cent to a total of TZS 87.19mln ($0.038mln) realised in 68 deals compared to TZS 479.74mln ($0.208mln) realised during the previous week. The week had four trading sessions due to the Eid Holiday on Friday 31st July 2020.

Locals were dominant in both sides of the market as foreign investors were silent along TBL. Locals accounted for 88.9 per cent of the buying side and 100 per cent of the selling side while foreigners accounted for the balance.

Market, Bills and Bonds

The interbank rate marginally dropped by 2bps on a weekly basis, up to 29th July 2020. The mentioned day closed at a weighted average interbank rate of 3 per cent compared to 3.02 per cent in the end of the previous week. The total value of transactions realised on the Interbank Money Market (IMM) during the week was TZS 70bln ($30.3mln). The value of transactions was 40.7 per cent lower than the value realised during the previous week.

For the first time in the history of primary Treasury auctions in Tanzania a bond was bought at a premium price on the auction held on 29th July 2020. The Bank of Tanzania offered a TZS 136bln ($58.89mln) 20years Treasury bond to the public. The public had a substantial appetite leading to an oversubscription of 158 per cent with a tender size of TZS 350.44bln ($151.76mln) from 592 bids. The lowest and highest bids were 98.8475 and 100.2457 respectively while the spread between the lowest and highest successful was further tightened by more than half.

 

Despite the high appetite and rise in bid prices, the Bank of Tanzania accepted 353 bids worth TZS 134.1bln ($58.07mln) which is 98.6 per cent of the total offer. The rise in bid prices and tightened spread of the lowest-highest successful prices led to a fall of the weighted average yield to maturity (WAYTM) by 15bps. The WAYTM realised by the auction was 15.64 per cent while the coupon carries a coupon rate of 15.49 per cent.

Currency Market

Up to Wednesday 29th July 2020 the shilling appreciated by 10 pips on a weekly basis after closing the day at a weighted average exchange rate of TZS 2,309.27/USD. The value of transactions during the week dropped by 16.4 per cent to a total of $6.35mln compared to $7.6mln during the previous week. The shilling has been gaining stability since the end of June as economic activities resume back to normal.

orbit@orbit.co.tz; imani@orbit.co.tz,

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Author: Weekly Markets Synopsis

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