DSE equity market fairs well as debt yields drop

DSE equity market fairs well as debt yields drop

The Dar es Salaam Stock Exchange (DSE) equity market has fared well in the first weeks of this year thanks to yields falling in the debt market.

The DSE like many other world exchanges were swept by Covid-19 contagion in the last two years where economies contracted pushing investors to look for less risk instruments, mainly debt and gold.

The wave affected the trading volumes turnovers and prices of the DSE to heavily lower its activities as investors turned to their attention fixed income instruments-treasury bonds.

However, the turn of the year changed the trade as debt instrument yields kept going down for a year now for long tenure curves threatening to throw the market into a humped stance.

Financial experts explain that stocks and bonds compete for a finite quantity of investor funds. Bonds would be typically seen as a safer investment, while stocks usually offer greater opportunity for profit. This creates an environment where investors will often favour one over the other in order to rebalance their portfolio, particularly in times of positive or negative economic growth.

Zan Securities Chief Executive Officer Raphael Masumbuko said they started with a big change occurring in Treasury yields.

"With yields falling in the fixed income market the equity section of the capital market has fared well in the first month of the year...," Mr Masumbuko said in its firm's weekly market wrap-ups report.

The long end of the curve continues to fall substantially and the overall curve has slightly adjusted downwards at almost the same level as intermediate ones.

"Pessimism about yields may shift focus to the equity market mostly," Mr Masumbuko said adding, “It has not necessarily been that any new data has come out that would have prompted this sudden change."

For the week ending last Friday, the Tanzania share index (TSI) went up by 56.12 points (1.6%) with stocks such as CRDB rising up by 8.5 per cent year to date, giving signs of impressive activities for the rest of the year.

"The underlying narrative is positive with expectations we will see another year of strong earnings growth," Zan CEO said.

The DSE equity market bounced back with a bullish performance after rose by 120 per cent to 2.56bn/-, which attributed to multiple pre-arranged block trade transactions last week from 4.82 million shares traded.

Three counters dominated the market share this week, led by CRDB at 35.91 per cent to total trades, followed by the self -listed DSE at 28.32 per cent and lastly Vodacom at 13.49 per cent.

Price movement was recorded on four domestic equities namely CRDB Bank appreciated by 5.08 per cent to end the week at 310/-per share, followed by DSE up by 3.08 per cent to close at 1,340/- per share and NMB Bank also gained 0.90 per cent to close at 2,240/- per share.

On the other hand, Jatu share price dropped by 3.90 per cent to 370/-.

The total market capitalization went up by 0.55 per cent to 15.81tri/- and domestic market capitalization also rose by 0.48 per cent to closed at 9.614tri/-.

Vertex International Securities said in its weekly market review that the equities recorded a good performance last week as turnover, volume and prices increased.

"We expect the performance to continue to increase next week," the Vertex report said.

Also last week, DSE debt activities in the secondary market dwindled compared to the preceding week as the Bank of Tanzania re-opened a 25 year treasury bond.

The value of bonds traded in the secondary market was 23.64bn/- a fall of 62.26 per cent last week from 62.66bn/- recorded in the previous week while the corporate board segment recorded no activities this week.

"We expect the 13.8 per cent weighted average yield recorded on the 25-year primary T-bond re-opening auction this week to have a domino effect on the prices of 15 and 20-year papers in the secondary market," Mr Masumbuko said.

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