Investors’ wealth on Dar bourse on historic jump

Companies trading on the Dar es Salaam Stock Exchange (DSE) have recorded significant growth in market capitalisation for the first half of the year, an achievement that industry sources attribute to impressive performances of the listed firms.

The dramatic surge in share values of almost all trading stocks in the first half of the year is historic since the formation of the bourse some 15 years ago and introduction of the indices seven years ago. 
The stocks that have seen their share value skyrocketing are CRDB, TCC, TaTePa, NMB, Swissport and TBL, which recorded percentage growth of 92.85, 54.76, 50.00, 44.64, 17.44 and 7.33, respectively.

Not only share prices have climbed north but also DSE’s indices have reached all time high levels, with Tanzania Stocks Index (TSI) overtaking the DSE all share Index (DSEI) in due courses. The rise, measured by the Tanzania Share Index (TSI) that tracks domestic listed companies means shareholders’ wealth in domestic listed companies has increased by 28 per cent since January to date.

DSE Chief Executive Officer Moremi Marwa says, “This (trend) indicates good fundamental performances in terms of revenue and profitability of the listed companies.” According to Mr Marwa, the percentage increase of the wealth is equivalent to 1.084trn/-, as domestic market capitalisation grew from 2.823trn/- in January to 3.907trn/-at the end of June.

Out of the two major quoted indices, TSI gained the most after climbing by 27.75 per cent to settle at 1,811.89 points while DSEI gained by 6.31 per cent to close the market at 1,575.83 points. This, TSI upswing, according to official data, is the highest index gain in six months since the indices were introduced some seven years ago.

In January, DSE data shows that the TSI started well below DSEI at 1430.46 points against 1485.63 points, but its gain was mainly pushed by bank stocks’ share price gain. DSE forecasted that the trend may continue in the remaining half of this year on back of good economic indicators that shows economic expansion.

“We expect the same trend to hold as liquidity in the economy increases, inflation and interest rates slow down and positive sentiments and market confidence is enhanced. This is cemented further by good macroeconomic parameters and prospects...,” Mr Marwa said. During the same period, the market turnover—value of shares transacted—reached 45bn/- against the 28bn/- recorded from July to December 2012.

Tanzania Securities’ Research and Bonds Trading Officer Upendo Lyatuu says that the share rally movement to the north was the results of increasing awareness on the potential return on portfolio investments. “We are daily receiving a good number of potential investors asking about the market and its products.... this is the sign of growing awareness,” Ms Lyatuu says.

Besides awareness, she says due to limited products on the market, buyers of CRDB shares in particular were offering high prices to entice sellers to dispose off their equities, pushing up prices. “There is huge demand for shares as investors anticipate firms to perform well and pay handsome dividends... the Dar’s investors are driven by dividends,” argues Ms Lyatuu.

CRDB was the highest appreciated stocks under the reviewed six-month period, with shares surging by about 93 per cent, the highest level in four years. The bank’s share price positive reception, analysts say, was pushed by diminishing bad debts that the bank suffered from the global financial crisis that hit in 2008, slowing down the bank’s profitability level.

Data show that CRDB share traded at 140/- at the opening of the year and surged to 290/-, the gain which has yet to be seen in any other period of the bourse history since the introduction of the index seven years ago. The Orbit Securities Heads of Operations and Dealings, Juventus Simon, says CRDB share demand has been pushed up by first quarter good results while speculation of the same in the second quarter is envisaged.

“The bank’s NPLs (non performing loans) have descended well since last year’s fourth quarter, encouraging investors to increase demand amid expectations of the trend to continue. “There is limited supply of CRDB shares as the market depends (solely) on individual sellers,” says Mr Simon, adding: “It seems the bank’s stocks are diminishing.”

International Monetary Fund (IMF) said on its Tanzania Country Report last month that the economic growth will continues, with growth projected at seven per cent in the medium term. “In the absence of external shocks, inflation is expected to remain in single digits,” the fund said. Inflation is number one stock’s return enemy as it eats up the gains.

It also pushes up government securities’ interest rates to compete negatively with equity returns. IMF said that the monetary policy was being tightened to deliver seven per cent inflation by the end of this year from a high of 20 per cent in late 2011. Mr Simon says the value of shares has increased because both—retail foreign and local investors—are confident with the performance of the country’s economy.

“There is also a new phenomenal, regarding domestic investors, I think the culture of saving is growing,” Mr Simon says, noting that the super performance of DSE is an indication that saving culture was on the rise.

But, despite the good performance DCB bank stocks depreciated by 38.7 per cent to 400/- in the last six months. But, stockbrokers say the stocks spiral trend was the result of the right issue that offered bonus shares to reduce its face value.
Source: The Daily News, reported by Abduel Elinaza from Dar es Salaam, Tanzania
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