TSI, domestic market register crucial movement

AFTER eight long weeks of rigidity, the Tanzania Share Index (TSI) along with the domestic market capitalisation finally registered some movement during the week that ended on 17th January 2020.

The TSI gained 4.5 points following a 0.14% jump of the domestic market capitalisation. It was CRDB that carried the TSI after gaining 5.26% on the counter’s price, counterchecking the 2.86% price decline on the NICOL counter.

CRDB’s price flew from 95/- to 100/- after moving 69mln shares which realized a turnover of TZS 6.6bln ($2.87mln). CRDB’s turnover accounted for 29.2% of the total turnover during the week.

For a while the falling price of CRDB has been defying the bank’s remarkable fundamentals due to negative sentiment that overshadowed the banking sector since 2017 and high liquidity of CRDB shares that fell victim to the foreigners’ sell-off since late 2018.

The declining prices of CRDB imposed skepticism to both domestic and foreign investors. Beginning January, appetite for the equity has been growing, leading to the upward movement of its price. CRDB counter closed the week with outstanding bids of 3.26mln most at a price of 100/-, while the offer side had nothing to show.

NICOL on the other hand has lacked supply for a while until the news broke that the Minister for Agriculture had revoked the Agreement between the fund manager and the government on the ownership and management of the Tanzania Meat Company based in Dodoma.

The Minister further instructed NICOL to pay a total of TZS 15bln ($6.52mln) for damages and compensation to the government. After the news, supply for NICOL reemerged and for the first time the counter traded at a price of 165/-.

Eventually the price of NICOL fell from 175/- to 170/- during the week under review. NICOL refuted all claims by the Minister and pacified investors of the “continuance of good governance and strict observance of the law”. The fund manager is currently trading at more than 85% discount from its Net Asset Value without including the meat company in its portfolio.

Back to the market, the total equity turnover during the week, realized from 94 deals, grew by more than ten folds from the previous week. Total turnover was TZS 22.6bln ($9.84mln) which marks the highest weekly turnover in the past two years.

TBL retained the top mover spot, accounting for 70.6% of the total turnover after moving 2mln shares mostly in off-market block transactions at a price of 8,000/-, 26.6% lower than the official market’s closing price. There is a growing interest from foreign investors as they remain dominant while net buyers for the fourth week in a row.

Foreigners accounted for 98.6% of investments and 78.91% of divestments, netting an inflow of $1.94mln (TZS 4.46bln). On switch of sides, the All Share Index (DSEI) lost 12.49 points during the week, following a 0.6% decline in the total market capitalization.

The downslide was a result of a 4.84% and 1.15% price decline on KCB and NMG respectively. KA, EABL and JHL went up by 11.11%, 0.87% and 0.62% respectively while USL remained constant.

Money Market, Bills and Bonds The total value of transactions on the Interbank Money Market (IMM) was TZS 18bln ($7.83mln), the lowest weekly total since October 2019, down 89% compared to the previous week. The interbank rates maintained a very tight spread of up to zero between the high and low for the better part of the week.

The weighted average interbank rate closed the week 20bps down at 4.0%. The second among three 2years Treasury bonds for the financial year 2019/20 was issued by the Bank of Tanzania during an auction that was held on 15th January 2020.

The auction attracted 143 bids worth a tender size of TZS 280bln ($121.74mln) marking an oversubscription rate of 104.4% over the offer size of TZS 137bln ($59.57mln). Reducing the frequency of the 2 years Treasury papers seems to have boosted investors’ appetite for the paper in the current financial year.

All 2 years papers issued have been considerably oversubscribed compared to multiple undersubscriptions during the previous financial year. The Bank of Tanzania accepted 87 bids worth TZS 167bln ($72.61mln) out of the tender size. The accepted amount is 22% higher than the offered amount.

Similar to other Treasury yields, the weighted average yield to maturity during the auction under review fell by 82bps from the previous 2 years auction, to report a WAYTM of 10.26%. Currency Market The shilling held on strong against the greenback during the week, recording a slight appreciation by 3 pips.

The shilling closed the week at a weighted average exchange rate of TZS 2,299.94/USD compared to TZS 2,299.97/ USD at the end of the previous week. The demand for foreign currency is picking up after three weeks of declining.

Value of transactions on the Interbank Foreign Exchange Market (IFEM) picked up by 17.4% to a weekly total of $15.5mln. The shilling is expected to hold strong in the near future as the Bank of Tanzania reports record high foreign reserves enough to cover more than six months of imports, as well as a surplus balance of payment.

The conflicts in Iran also dwindle the price of oil, somewhat 23% of Tanzania’s total imports, while global uncertainties stabilizes the price of gold, somewhat 22% of Tanzania’s total exports.

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