Shilling depreciation hurts Dar bourse

The shilling depreciation has favoured foreign investors’ participation on Dar es Salaam Stock Exchange (DSE), who are buying more shares as their involvement has increased by 91.35 per cent in the first quarter.

The shilling in this year’s first four months sunk to its lowest level in history since the local currency was introduced in 1966 after crossing a 2,000/- mark.

Market analysts have it that the shilling’s depreciation works in favour of foreign buyers who now get more shillings when changing their dollars to have more purchasing power.

On the other hand, foreigners get little when selling their shares at the current exchange rate thus holding their sales.

The DSE Chief Executive Officer, Mr Moremi Marwa (pictured), said the fall and rise of shilling against major currency has an effect to stock players, especially foreign investors whose returns have to be converted into hard currencies.

“ÉObviously this brings into the fore the issue of foreign currency risk, which is one of the key risk considerations for any investor,” Mr Marwa said, ‘hence, stability of the local currency is preferred than otherwise.”

Last week the bourse equity market’s turnover decreased by 46 per cent to 9.94bn/- from 18.52bn/- posted on the previous market.

Zan Securities CEO Raphael Masumbuko said bourse turnover slowing down is a result of basket variables including the ongoing Mwalimu Bank IPO, dividends season and shilling depreciation.

“There are a lot of factors surrounding trading, but shilling depreciation is among them, as it favours foreigners on buying but goes against selling,’ Mr Masumbuko said.

The Zan CEO said the depreciation makes foreigners to hold their share anticipating the shilling will appreciate in the coming future, as gains on share sell is eaten by currency fluctuation.

CRDB Bank said that interbank activities and continued demand caused the shilling to continue to weaken against the greenback during last Friday’s trading session.

“The local currency closed at the levels of 2005/2015 against the dollar, its highest levels in history,” CRDB Bank said yesterday on its market highlights.

The Bank of Tanzania (BoT) Governor, Prof Benno Ndulu, said the shilling in this year’s quarter-one went down by 9.6 per cent and 13 per cent on wholesale and retail markets respectively.

Other variables that are affecting the bourse turnover are normal demand and supply forces, which are seeing as the market enters into trading season period.

Also Mwalimu Bank primaries where buyers hold their bid until eleventh hours and financial results annunciation which will determine the share movement - down or up - in the coming days.

The Mwalimu Bank IPO ended on Monday. Recently, DSE said that earnings - capital gain - from listed stocks at the bourse, as measured in shilling was about 35 per cent in year-on- year basis up to end January - even considering the recent fall in Tanzania Shillings relative to US Dollar.
Source: Daily News, reported by Abduel Elinaza, from Dar es Salaam, Tanzania
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