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Investors show renewed interests on NMB shares

Investors show renewed interests on NMB shares

NMB saw its price drop for the second time in three weeks and ironically that was one of the best news for the market during the week that ended on the 15th of October 2021.

The price of NMB dropped by 4.46% to close the week at a price of 2,140/- per share. This shows the renewed interest of retail investors on the counter.

The price of NMB had changed only once in five years prior to the activities in the last three weeks, and the reason for the stagnancy was the belief by most investors that the market price of NMB was way overvalued.

Mostly NMB traded in prearranged deals at discounted prices, at times as steep discounts like 70%.

The price movement on the NMB counter may be a combination of two things. One is an improvement in the operations of the Exchange resulting in a functional market-oriented price determination mechanism on the largest counters. Second is the significant business improvement and growth of NMB in the last three years.

The net profit for the bank has more than doubled from 2018 to 2020 and looking to almost triple taking 2021 into account. This has been due to the growth of deposits and loans while the NPLs, at 4.3%, have been managed to a lower level than the regulatory set level hence healthy provisioning for the bank.

The bank has also been a leader in minimizing operational expenses mostly by digitization and adopting agency banking, as a result, more than 85% of the banks’ transactions are now undertaken outside of the bank’s branches, through mobile and agency banking. This led to a cost to income ratio (CIR) of 46% compared to a regulatory minimum level of 55% and is one of the few banks in the economy to comply with the regulatory requirement.

A lower CIR ratio leaves room for adjustment on lending rates for banks depending on the cost of deposits. Now as the central bank pushes for lower interest rates in the economy by providing cheap deposits to banks and easing on the reserve requirements, we see NMB easily taking advantage and provide a TZS 100bln facility at a lower than 10% lending rate to the agricultural sector.

With the fundamentals of the bank, and the way the economy is opening up, we expect more activities on the NMB counter and more price movement, and possibly an upward trend of the bank’s price is not far-fetched.

Along with NMB, three more counters were faced down during the week, including DCB, DSE and JATU which fell by 9.09%, 4.62% and 2.74% respectively.

The counters’ fall, especially NMB due to its magnitude, was enough to offset the appreciation of 4.17% on the CRDB counter. This resulted in a 10.33 points loss from the Tanzania Share Index (TSI) while the domestic market capitalization falling by 0.29%. The TSI and domestic market cap closed the week at 3,576.21 points and TZS 9,455.37bln ($4.10bln) respectively.

Only one cross listed counter saw a price movement during the week. With a complimentary note from domestic counters, the All Share Index (DSEI) fell by 6.85 points to close the week at 1,920.13 points. KCB was the only active cross listed counter and dropped by 1.05%, as a result, the total market capitalization went down by 0.36% to close the week at TZS 16,004.62bln ($6.93bln).

Since the market is still highly dependent on prearranged deals, the lack of these deals during the week under review saw the equity turnover fall by 82.5% to a total of TZS 239.72mln ($0.1038mln).

The total number of shares traded also fell by 86.8% to 474,223 shares traded in 212 deals, 30 deals less than the previous week. CRDB was the top mover for the week, accounting for 39% of the total turnover, followed by NMB which accounted for 30% of the total turnover.

Collectively CRDB and NMB accounted for 69% of the total turnover, maintaining banks’ dominance on the Exchange. With a lack of prearranged deals, TBL saw zero transactions during the week.

The foreign appetite of CRDB sustained the net buyer position of foreign investors during the week as they accounted for 60.26% of the total investment into the market during the week.

There was zero disposal of shares from foreign investors during the week. Local investors accounted for 39.74% of investments and 100% of divestments made during the week.

Market, Bills and Bond

The Interbank Cash Market (IBCM) saw only two trading sessions during the week, and as a result, the total turnover fell by 43.6% compared to the previous week which had four trading sessions. The total turn over for the week was TZS 22bln ($9.53mln), down from TZS 39bln ($16.91mln) traded during the previous week.

The interbank rate rose 40bps on a weekly basis marking a three weeks consecutive rise of the interbank rate. At the end of the week, the interbank rate stood at 3.9%. The 25 years Treasury bond auction held on the 13th October 2021 pulled some surprises such as a record number of bids and lowest yield since the inception of the tenor.

The Bank of Tanzania was a seeker of TZS 133.4bln ($57.8mln) from the public while offering a coupon of 15.95% for every unit of TZS 100/- of the bond. Bids from the public were at a record high, rising to 1,427 bids worth a tender size of TZS 636.6bln ($275.82mln).

This is equivalent to a somewhat 4.45% of the total size of listed Treasury bonds on the Dar es Salaam Stock Exchange, displaying the significant liquidity available in the economy despite some inflow being from East African investors seeking high yielded safe Treasuries. The Bank of Tanzania accepted only TZS 182.34bln ($79mln) equivalent to 28.6% of the tender size and 36.6% more than the offered size.

The Bank left a significant amount of TZS 454.26bln ($196.74mln) on the table. Investors, showing a heavy appetite, rose the prices as the lowest successful price rose from 100.1035/- to 102/- leading to 35bps loss from the coupon yield.

The weighted average coupon yield at the end of the auction was 15.5122%. Currency Market The total amount traded on the Interbank Foreign Exchange Market (IFEM) also fell by 42.5% to a total of $13.45mln, relaxing the growth seen in the last three weeks.

The IFEM also saw fewer trading sessions compared to the previous week, part of the reason for a lesser turnover.The appreciation of the shilling seems to have been short lived as the shilling lost during the week somewhat 67% of what was gained during the last two weeks.

The shilling depreciated by 225 pips on a weekly basis, closing the week at a weighted average exchange rate of TZS 2,308.95/USD.


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