Volatility may reduce the wind on the sails of DSE’s bullish drift

The Dar es Salaam Stock Exchange (DSE) registered decreased activities for the trading week ending March 24. Turnover for the week amounted to 675.28m/-, a decrease of 48.59 per cent from the previous week, however a number of stocks experienced price gains leading to the overall increase in market capitalization by 2.15 per cent.

The top three trading counters, CRDB, NMB, and TCCL, dominated the market with 53.32 per cent, 21.7 per cent, and 11.75 per cent of the overall market turnover, respectively. Counters reported upward price trends following suit from the previous week.

Four domestic counters registered price gains within the week, SWISS leading the gainers with a 12.7 per cent increase to close at 1,420/- per share. TCCL/Simba also saw a price increase of 6.68 per cent closing the week at 1,260/- per share.

CRDB continues its bullish rally registering an increase of 3.3 per cent closing the week at 470/- per share, lastly TPCC surged upwards by 3.06 per cent to close off at 4,040/- per share.

No domestic stock lost value within the trading week.

Total market capitalization went up by 2.15 per cent to 15.776tri/- and domestic market capitalization went up by 1.13 per cent closing at 10.843tri/-.

Key benchmark indices

  • All Share Index (DSEI) closed at 1,892.98 points increasing by 2.15 per cent.
  • Tanzania Share Index (TSI) closed at 4,102.15 points increasing by 1.13 per cent

 

Sector Indices

  • Industrial & Allied Index (IA) closed at 5,083.63 points, up by 0.46 per cent
  • Bank, Finance & Investment Index closed at 4,001.09 points, up by 2.88 per cent.
  • Commercial Services Index closed at 2,151.95 points, up by 0.31 per cent.

 

Debt Market

Primary market

On 22nd March 2023, the central bank was in the primary market offering Treasury bills of 9.9bn/- was offered for the 35-day maturity, 19.9bn/- was offered for the 91-day T-bill. Also 69.9bn/- and 77.2bn/- were offered for the 182-day and 364-day maturities respectively.

Generally, there was a decrease in demand for treasury bills in part due to yields falling in the last two auctions across all maturities, as seen by decreased subscription rates mostly on the 182-day and 364-day maturities. The 35-day maturity, however, saw a noticeable increase in demand being subscribed by 167 per cent relative to only 45 per cent received in the previous auction.

Bank of Tanzania (BoT) accepted more than it offered on the 35-day and 364-day maturities, taking advantage of the oversubscription in these maturities to mop off the liquidity in the market and reducing inflationary pressures. On the other two maturities, the central bank accepted all the amounts tendered since they were undersubscribed. This auction’s acceptance rate is relatively higher in the 182-day and 364-day maturities than the last two issues where the central bank accepted at most the offered amount across all maturities.

Overall, average yields slightly increased on most maturities, the 35-day gained 1 basis point reaching 3.46 per cent, the 91-day also gained 1 basis point to reach 4 per cent, the 182-day yield increasing by 3 basis points to 5.09 per cent. The 364-day bill however continued its streak of decreasing yields since the last three auctions this time losing 9 basis points reaching a weighted average yield of 6.56 per cent.

Secondary market

Trading activities decreased for the trading week ending March 24, Overall turnover for the week decreased by 42 per cent from 67.8bn/- registered in the previous week to 39.2bn/-. More so number of trades decreased from 64 trades recorded in the previous trading week to 25 trades.

Overall tenures traded were predominately on the long end of the yield curve, with the off-the-run 20-year accounting for 68.7 per cent of the traded volumes.

Activities in the corporate bonds increased for the trading week, NMB bond registered 4 trades with aggregate face value of 25m/- trading at average prices of 89/-.

Outlook

Domestically, despite tightening macro conditions in 2022, local equities have continued to fair on a strong footing for the first three months of 2023.

Specifically, the Tanzania Share Index (TSI) appreciated by 5.4 per cent year-to-date (YTD) primarily driven by the flurry of positive earnings releases of big cap stocks such as NMB and CRDB.

Furthermore, moderation in inflation amid strong economic growth outlook numbers for 2023 boosted risk appetite for stocks in the bourse. Heading towards the earnings season we expect the bullish momentum which commenced at the start of the year to persist however slight volatility will reduce the wind on the sails.

Globally, the recent collapse of Silicon Valley Bank (SVB) has sparked fears over the global financial system further shaking up the financial and tech circles across the globe. Other lenders including Signature Bank, First Republic Bank have felt the severe jolts.

Furthermore the Credit Suisse debacle has weakened confidence in the financial market particularly for banking stocks, in which last week UBS agreed in principle to acquire Credit Suisse in bid to halt a banking crisis. UBS will pay 3 billion Swiss francs ($3.25 billion) for Credit Suisse, about 60 per cent less than the bank was worth when markets closed on Friday March 17th.

In conclusion, we expect global equity markets to be volatile in the weeks ahead as markets digest the emergency acquisition of Credit Suisse by its Swiss counterpart UBS. While the markets main focus remains the turmoil in the banking sector, investors will have one eye on central bank activity this week as officials face the conundrum of balancing inflationary concerns with recent market volatility pressures and the likely implications for economic activity and the appropriate response for monetary policy. In the domestic front we expect stocks to not translate global shocks in the financial markets, more so earnings season will slightly propel stocks higher as investors’ price in dividends.

Mr Masumbuko is a Chief Executive Officer of Zan Securities—a capital markets and securities authority licensed dealer and a member of the DSE. raphael.masumbuko@zansec.co.tz

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