Tanzania Daily News (Dar es Salaam)

5 February 2013

Tanzania: ABGs London Fortunes Rattle Dar es Salaam Bourse

THE capital market has come of age in the last two years after its contribution to Gross Domestic Product (GDP) rose to reach six per cent.

The increase from two per cent of 2010 to six per cent in 2012 marked the importance of the portfolio investment in the country which drove the central bank to swift policy from reserve money to interest rates targeting. The Capital Markets and Securities Authority Chief Executive Officer, Ms Nasama Massinda, said the number of investors in the stock market increased from 172,806 in 2010 to 180,108 in 2012.

"The increase resulted from the rise in the number of market players in the industry," Ms Massinda told the Parastatals Organizations Accounts Committee (POAC) when its members visited the CMSA offices in Dar es Salaam. The Dar es Salaam Stock Exchange (DSE) key equities market indicator, the domestic market capitalisation jumped to 2.48tr/- in the last two years compared to 1.62tr/- recorded in 2010. The total market capitalisation stands at 13.213tr/- of last week.

The market capitalisation, according to money market analysts, allows investors to understand the relative size of one company or bourse versus another, though they are not factor in the debt size. This approach, they believe, allows them to take advantage of the fact that smaller companies or bourses have historically grown faster but larger companies have more stability and pay fatter returns or dividends.

Tanzania Securities Chief Executive Officer Moremi Marwa said if market capitalisation is going up when there is no new listings or right issues, it makes investors optimistic that share prices are increasing. "But when market capitalisation (for companies or bourse) are climbing down, when there is no new listing or right issues, investors turn pessimistic," said Mr Marwa.

Orbit Securities' Research Unit said local investors participated actively in the market managing to carry out deals worth 97.8bn/- in the first quarter of this year compared to 89.23bn/- raised between January and March 2012. Orbit, in their weekly report ending January 31, announced that foreign investors injected 2.22bn/- in January compared to 10.77bn/- mobilized in the first quarter of last year.

The market report demonstrates further that the DSE all-share index (DSEI) increased to 1,491.37 points from 1,298.28 points in January 2012. The Tanzania share Index (TSI) surged to 1,454.72 points compared to 1,119.32 points recorded in the corresponding period 2012 according to the index.

The 'Daily News' shows that DSE total market capitalisation spiralled down by almost 20 per cent following African Barrick Gold (ABG) share price fluctuation in the London Stock Exchange (LSE) as quoted by FTSE 250. ABG share price dropped a fortnight ago when China Gold backed out of sales talks. The share price tumbled from 444 pence (11,544/-) to 356.80 pence (9,277/-) of last Friday since the buy-off deal dematerialized.

The share price fall sank ABG market capitalisation to 3.804tr/- from 4.734tr/- a fortnight ago, pulling down the DSE market cap by 930bn/- from total of 13.213tr/-, the miner's share controlling over one-third of total Dar bourse market cap. Mr Marwa said that ABG share price has had a negative impact on the DSE's market cap since the deal was put-off, but affecting the economy marginally since the transactions were done abroad.

"ABG impact to DSE is a spiral down effect to only lower market cap... (But) not economically since shares change hands abroad," Mr Marwa said. The expansion of the Dar's capital and securities market and the economy as a whole, forced BoT to change one of its macroeconomic fundamental control policy from targeting reserve money to interest rates.

The BoT Director of Economic Research and Policy, Dr Joe Masawe, said though money target works its efficiency on expansion economy is not that perfect than interest rates policy. "The economy now works at the different era, (thus) spearheading migration to targeting interest rates from money, which has positive challenges," Dr Masawe said.

The challenges include developing further the money markets such as Debt Market, Dar es Stock Exchange and Foreign Exchange Market that normally fluctuate in either direction on central bank interest rates. Among them, according to the immediate former DSE Chief Executive Officer, Mr Gabriel Kitua, lure companies or government to offload a portion of its stake on the bourse.

"ÉThe government needs to show the way in order to increase market participation in the bourse," Mr Kitua told POAC. To start with, he proposed that the 40 per cent stakes which the government own in Airtel should now be reduced and be given to locals through the stock market.

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