STOCK MARKET
Tanga Cement wrapped up the week as the top-performing stock, registering a 3.3 per cent increase. This achievement is noteworthy considering the ongoing uncertainty surrounding its acquisition deal.
In 2022, the company incurred a loss of TZS 22 billion, putting an end to its previous profit streak that had resulted in a TZS 3 billion profit in 2021.
NMB stood out as another impressive performer, wrapping up the week with a notable 2.2 per cent increase.
In its half-year results for the period ending on June 30, 2023, the bank achieved a pre-tax profit of TZS 374 billion, marking a 26 per cent surge compared to the corresponding period in 2022.
Post-tax, the profits amounted to TZS 262 billion, reflecting a 26 per cent growth from 2022. NMB’s investors enjoyed a substantial 29 per cent return on equity.
Furthermore, NMB maintains a high level of efficiency, boasting a cost-to-income ratio of 38 per cent, which outperforms the Bank of Tanzania’s recommended ratio of 55 per cent.
Stocks that closed the week with declining momentum included CRDB, which saw a decrease of 1.07 per cent, and NICOL, which registered a 1.03 per cent drop.
CRDB took the lead in trading activity, contributing to approximately 75 per cent of the total traded volume and 67 per cent of the overall turnover.
Unexpectedly, VODA emerged as a participant, accounting for around 18 per cent of the traded volume and 17 per cent of the total turnover.
Investor participation has been notably influenced by domestic investors, a trend that has persisted for nearly a year.
This shift in behaviour stems from the impact of global rate hikes, which prompted investors to seek safer returns in global financial markets. Additionally, the emerging concern of currency risk across African nations has further hindered portfolio investments from foreign investors.
Despite a decline in activity within the equity market, it’s important to note that the market remains undervalued, yet holds significant growth potential.
FIXED INCOME SECURITIES
Investors are eagerly anticipating tomorrow’s 25-year bond auction, which will be conducted by the Bank of Tanzania.
This particular auction holds special significance as it marks the first of three 25-year bond auctions scheduled in the 2023/24 Government Securities issuance calendar.
What adds to the attractiveness of the 25-year bond for most investors is its compelling 12.56 per cent coupon rate, paid semi-annually. However, it’s worth noting that, apart from professional bankers, many investors tend to overlook the prevailing yield.
When delving into the realm of fixed-income investments, investors frequently encounter two crucial terms: “yield” and “coupon rate.”
While both play significant roles in bond investing, concentrating on yield offers a more accurate and comprehensive understanding of a bond’s potential returns.
The coupon rate represents the fixed annual interest rate that a bond pays based on its face value.
On the contrary, yield depicts the total return an investor can anticipate from a bond. It factors in not only the coupon payments but also any possible price fluctuations.
Yield takes into consideration the bond’s current market price and the coupon payments, presenting a more realistic estimate of the investment’s profitability.
At present, the yield for the 25-year bonds stands at approximately 13.6 per cent.
Although coupon rates provide insights into the fixed interest payments a bond offers, yield provides a broader and more dynamic perspective on the investment’s potential return.
By accounting for price fluctuations, current market conditions, and reinvestment risk, yield empowers investors to make informed decisions that align with their financial objectives.
As you navigate the bond market, keep in mind that giving prominence to yield can lead to more precise evaluations and improved investment outcomes.
