5 February 2013

Tanzania: Cross-Listed Shares Seen Dormant At Dar Bourse

CROSS-LISTED shares on the Dar es Salaam Stock Exchange (DSE) are hardly trading because all are properly priced at home and there is general lack of communication.

There are six companies which are listed on the Nairobi Stock Exchange (NSE) and London Stock Exchange (LSE) and cross listed on DSE, which seldom trade on the Tanzanian bourse. "The cross-listed shares were not offered at primary stage but introduced on the secondary stage, thus making them expensive and also not in the hands of the locals," said Mr Raphael Masumbuko, the Chief Executive Officer of Zan Securities.

The CEO said should the firms apportion some shares and list them at primary market this could permit the trading as the secondary market. However, Mr Masumbuko, said since most of the shares are reflecting prices at the bourses of origin, which are advanced than DSE, it makes them expensive for Dar es Salaam investors to buy.

"Local investors therefore often opt to buy locally listed shares which are underpriced than cross-listed ones," he said adding "in that vein the crosslisted share will continue to be dormant." Tanzania Securities CEO Mr Moremi Marwa said another problem was that "NSE and LSE are not talking to DSE."

"The CDs (Certificates of Deposit) are not integrated thus denies (Tanzania) investors to know closely what is happening at the other markets," Mr Marwa said, "this and low awareness lockout activities on DSE." Apart from lack of market integration there is also increased cost of transferring shares outside the system, where different procedures have to be applied thus cutting down investors' yields.

The six cross listing firms are controlling almost 80 per cent of the DSE total market capitalisation of 13.22tr/- while the remaining eleven local companies market capitalisation is 3.03tr/-,which contributes 6 per cent to GDP. The six companies are African Barrick Gold (ABG), Kenya Airways, KBC Bank, Jubilee Holding (JBH), EABL and Nation Media Group.

The ABG at 3.80tr/- at end of last month controls almost one-third of total market capitalisation and was the biggest for the listed 11 local firms. ABG share price is also the most valued at 13,160/- followed by JBH at 5,880/- at the bourse. Late last year, the DSE in collaboration with other nine bourses in the Southern African Development Community (SADC) was driving to adopt a computerbased platform to increase effectiveness of trading activities.

The Committee of SADC Stock Exchanges (CoSSE) had agreed to concentrate on six priority areas in support of regional moves to more efficient capital markets. The integration of East African Community bourses was also on track to facilitate crossborder share trading

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