DSE stable despite shilling's fluctuation

The DSE Chief Executive Officer, Mr Moremi Marwa.Fluctuation of the shilling has little impact on the performance of the Dar es Salaam Stock Exchange (DSE) because its influence on the economy is marginal.

Figure shows the shilling since January has been fluctuating, but the Tanzania Share Index went up by 79.07 per cent to 2561.54 points. 

Investors said that the foreign currency demand to buy shares from overseas portfolio was still low to make its impact on exchange rates.

The DSE Chief Executive Officer, Mr Moremi Marwa, said that foreign investors are buying shares of between 0.5 and 1.0 million US dollars which has little effect on the bourse.

"We don't see direct relationship between exchange market and bourse's indices," Mr Marwa told the 'Daily News', because types of activities in participation have different motives. 

The CEO said investors are not selling dollars/shillings to invest in shares.

"We are seeing significant impact when budget support fund is pouring in and during traditional crops exports seasons but not on exchange market," Mr Marwa said.

In developed markets the exchange rates have significant impact on indices due to big number of foreign investors who are reacting with the exchange movements.

"We (DSE) are yet to reach there," he said, adding developed markets react on inflation, GDP and exchange rates (but not the Dar bourse).

The Orbit Securities, Head of Dealings and Operations, Mr Juventus Simon, said the bourse could react significantly if the level of foreign investors is high. 

"Shilling volatility could have a meaningful impact on the bourse should the demand to buy shares from outside soars ..but it's still not that high," Mr Simon said.

He said the situation may be reached when the DSE expands to become the barometer of the economy. 

Analysts have it that the shilling fluctuation would have a consequential impact when the capital account restriction is lifted thus allowing more portfolio investors from overseas.

The investors when buying shares or government securities will pump more foreign exchange but drained the foreign reserves when selling their shares and want their money home.

As of now the capital account is substantially controlled, but Bank of Tanzania (BoT) has developed a plan for the gradual lifting of capital controls by 2015.
Source: Daily News, reported by Abduel Elinaza from Dar es Salaam, Tanzania
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