Investors at Dar es Salaam Stock Exchange (DSE) are still obtaining high returns despite the shilling free-fall in recently months, as combined gains outshine local currency depreciation.
The shilling, according to official figures, depreciated by about 15 per cent on year-onyear basis against US dollar between April 2014 and April 2015 sending the central bank to apply extra mechanism to reverse the trend.
DSE Chief Executive Officer, Moremi Marwa said that the bourse total market capitalization during and domestic market capitalization increased by about 33 per cent and almost 50 per cent respectively. “… (This is) on top of the dividend yield which has averaged about 5 percent on the year-on-year basis,” Mr Marwa said.
The CEO added: “these data says that despite the fall in shilling, returns that investors obtain in dollar term are still on the upper side by a minimal of 20 percent margin”.
The combined gains, capital gain and dividends, are higher than by more by 20 per cent than the loss that investors - mainly foreign - pay in the exchange loss.
The gain is based on such fundamental analysis that foreign investors still counts for an average of more than 70 per cent of our periodical turnover.
Having said that”, Mr Marwa said, “we however, may wish to understand that the depreciation of the local currency against dollar hurts all kind of value investors (not speculative investors)”.
Mr Marwa said a prolonged situation of shilling’s loss versus the US dollar may cause foreign investors to rebalance their portfolio position in relation to “our market and our country.”
The prolong period is despite an understanding that the depreciation of the local currency is largely a result of the strength of US dollar based on the US economic growth.
Last week the shilling strengthened after the Central Bank announced to further intervene to end its four-month slide to historical lowest levels against the dollar.
BoT said the central bank sold 339 million US dollars in the market from January to April, this year to prop up the shilling but the local currency continued to weaken due to huge import bill.
Some measures BoT took include reducing the level of foreign currency that banks are allowed to remain with that can be used to seek benefits for foreign exchange transactions.
The shilling, according to official figures, depreciated by about 15 per cent on year-onyear basis against US dollar between April 2014 and April 2015 sending the central bank to apply extra mechanism to reverse the trend.
DSE Chief Executive Officer, Moremi Marwa said that the bourse total market capitalization during and domestic market capitalization increased by about 33 per cent and almost 50 per cent respectively. “… (This is) on top of the dividend yield which has averaged about 5 percent on the year-on-year basis,” Mr Marwa said.
The CEO added: “these data says that despite the fall in shilling, returns that investors obtain in dollar term are still on the upper side by a minimal of 20 percent margin”.
The combined gains, capital gain and dividends, are higher than by more by 20 per cent than the loss that investors - mainly foreign - pay in the exchange loss.
The gain is based on such fundamental analysis that foreign investors still counts for an average of more than 70 per cent of our periodical turnover.
Having said that”, Mr Marwa said, “we however, may wish to understand that the depreciation of the local currency against dollar hurts all kind of value investors (not speculative investors)”.
Mr Marwa said a prolonged situation of shilling’s loss versus the US dollar may cause foreign investors to rebalance their portfolio position in relation to “our market and our country.”
The prolong period is despite an understanding that the depreciation of the local currency is largely a result of the strength of US dollar based on the US economic growth.
Last week the shilling strengthened after the Central Bank announced to further intervene to end its four-month slide to historical lowest levels against the dollar.
BoT said the central bank sold 339 million US dollars in the market from January to April, this year to prop up the shilling but the local currency continued to weaken due to huge import bill.
Some measures BoT took include reducing the level of foreign currency that banks are allowed to remain with that can be used to seek benefits for foreign exchange transactions.
Source: Daily News, reported by Abduel Elinaza, from Dar es Salaam, Tanzania
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