Why DSE indices soared to new heights in February

February was an exceptional month for investors in the Dar es Salaam Stock Exchange as both of its indices soared to new heights. The All Share Index closed with a remarkable 18-point gain, while the Tanzania Share Index outdid itself with an outstanding 118-point increase.

The impressive rally in the equity market was largely due to the strong earnings reports of several listed companies, including CRDB, NMB, Twiga Cement, DSE, and NICOL. These companies showcased their exceptional performance, driving investor confidence and contributing to the market’s upward trend.

Among these companies, NICOL emerged as a top performer, with its share price closing the month 25% up. This achievement was a result of NICOL’s remarkable earnings report, which showed an impressive 54% increase in profit from TZS 3.9 billion to TZS 5.98 billion in 2022.

Banking stocks stood out as some of the best-performing securities with CRDB’s share price finishing the month with an impressive 15% increase, while NMB’s stock surged by 8%. The strong financial results reported by these companies drove investor interest, with these two banking stocks accounting for about 90% of the trading activity.

Other listed companies also closed the month on a positive note, including Tanzania Investment Company Limited (TICL), which saw a 7% increase in its share price. Dar es Salaam Commercial Bank (DCB) share price surged by 3.3%, Twiga Cement saw a 3.2% increase, and the self-listed Dar es Salaam Stock Exchange closed with a 2.4% increase.

Although the SWISS counter experienced a 5% drop in its share price, the overall trend in the equity market remained positive.

Equity turnover in the Tanzanian market increased significantly, with a recorded turnover of TZS 8.8 billion, representing a 27% rise from January’s TZS 6.9 billion.

Despite a 41% decrease in the volume of traded shares, the market’s total capitalization surged to a 52-week high of TZS 16 trillion, while the domestic market capitalization stood at TZS 10.7 trillion.

Market activity in the Tanzanian stock market was dominated by domestic investors, accounting for more than 88% of all trading activity.

This trend has continued for the past six months, as global macroeconomic shocks have led central banks to revise interest rates in response to high inflation that started to gain momentum in the second half of 2022.

Due to the volatility in financial markets resulting from these macroeconomic shocks, foreign investors have remained cautious, resulting in the dominance of domestic investors in the market.

However, as inflation cools and the investment landscape stabilizes, we expect to see foreign investors return to the market and foreign inflows return to normal levels.

On Wednesday, the Bank of Tanzania held a highly anticipated 25-year treasury bond auction that generated significant excitement among local investors due to its attractive coupon and yield.

The bank offered to raise TZS 180 billion, but the amount tendered by investors amounted to a staggering TZS 410 billion, highlighting the high demand for government bonds in Tanzania.

Out of the 511 bids submitted, only 307 were accepted, resulting in a weighted average price of 97, and a collection of TZS 258.9 billion. The oversubscription rate was an impressive 128%, indicating the strong appetite for government bonds among Tanzanian investors.

However, the weighted average yield of 12.96% was the highest seen since the revision of coupon rates earlier last year, marking a 20-basis point jump.

It’s worth noting that government bonds have become a popular investment asset among Tanzanian investors over the past three years due to their attractive interest payments. Bonds are also preferred collateral assets for various commercial banks when clients seek to secure loans.

Overall, the auction’s success highlights the high demand for government bonds in Tanzania, driven by the attractive yields they offer. As such, investors should continue to monitor the Tanzanian bond market for potential investment opportunities.

orbit@orbit.co.tz; ammi.mwamunyi@orbit.co.tz

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