15 January 2019

Tanzania: Bear Market Extends On Falling Shares Price

Dar es Salaam Stock Exchange maintained a bearish trend during the week that ended on 11th January 2019.

The Tanzania Share Index (TSI) lost 54.87 points following a 1.5 per cent decline in the domestic market capitalization.

TSI and domestic market capitalization closed the week at 3,632.10 points and TZS 9,540.48 billion ($4.16 billion) from previous week's 3,686.97 points and TZS 9,684.62 billion ($4.21 billion) respectively.

The bear during the week was fed by shrinking prices of two counters namely TBL and CRDB by 3.1 per cent and 6.7 per cent respectively.

TBL closed the week at a price of TZS 12,500 from previous week's TZS 12,900 after trading 317,189 shares generating a turnover of TZS 3.96 billion ($1.73 million) accounting for 97 per cent of the total equity turnover during the week.

CRDB closed the week at TZS 140 from previous week's TZS 150 after moving 536,976 shares generating a turnover of TZS 75.18 million (TZS 0.033 million) accounting for 1.8 per cent of the total turnover.

Total equity turnover grew nine folds during the week compared to the previous week thanks to a massive movement by TBL. Equity turnover during the week grew to TZS 4.066 billion ($1.77 million) from previous week's TZS 445 million ($0.19 million).

Foreign investors accounted for 96.47 per cent of total investments into the market while accounting for 96.23 per cent of total divestments from the market. Total market capitalization went down as well, falling by 2.4 per cent closing the week at TZS 19,189.63 billion ($8.37 billion) from previous week's TZS 19,663.70 billion ($8.57 billion).

Consequentially, the All Share Index (DSEI) lost 49.17 points to close the week at 1990.85 points. The decline in total market capitalization and DSEI is mostly a result of cross listed companies' prices shrinking.

National Bureau of Statistics (NBS) released the inflation report for the month of December 2018 which depicts annual inflation rate for the year ending December 2018 to be 3.3 per cent.

Average annual inflation for the year 2018 was 3.5 per cent down from 5.3 per cent for the year 2017. Average food inflation for the year 2018 went down to 3.7 per cent from 2017's 9.6 per cent as a result of bumper harvests in both years.

Most inflation pressure is seen on energy and fuel, which was by 17.7 per cent for the year ending December 2018.

Increased inflation as a result in increase of oil prices or any items used in production process, also known as cost-push inflation, would be harmful to consumption patterns as it eats up disposable income.

The kind of inflation required is demandpull inflation which is a result of increased disposable income in consumers' wallets.

Money Market, Bills and Bonds Total amount traded in the Interbank Money Market (IMM) was up 41.8 per cent during the week posting a total amount of TZS 112 billion ($48.8 million) compared to previous week's TZS 79 billion ($34.46 million).

Increasing traded amount in the IMM is going parallel with the rising interbank weighted average rate which gained 43 bps during the week to close at 3.81 per cent highest point in almost two years, from previous week's 3.38 per cent.

In a Treasury auction conducted by the Bank of Tanzania on 9th January 2019, the Bank offered Treasury bills worth the usual TZS 141 billion ($61.5 million) and the market oversubscribed the offer by 21.3 per cent with a tender size of TZS 171.04 billion (74.6 million).

The Bank accepted TZS 138.13 billion ($60.2 million) which is 98 per cent and 80.7 per cent of the offer size and tender size respectively.

The total weighted average yield (WAY) lost 9bps compared to the previous Treasury bills auction conducted on 24th December 2018.

Weighted average yield in the auction under review posted 8.38 per cent compared to previous auction's 8.47 per cent.

Currency Market Total amount traded in the Interbank Foreign Exchange Market (IFEM) increased by 15.8 per cent to a total amount of $3.36 million up from previous week's $2.9 million.

The mount traded in the IFEM has declined significantly recently. In uncommon occurrence, with an exception of 21st December 2018, all trading sessions since 20th December 2018 have recorded amounts lower than $1 million.

A similar occurrence in single trading sessionswasin January 2018 after May 2017. IFEM has never recorded similar numerous consecutive sessions with amounts traded lower than $1 million.The shilling was fairly stable with a mere depreciation of 0.017 per cent to close the week at TZS 2,293.11/USD from previous week's TZS 2,292.72/USD.

In the Monthly Economic Review by the Bank of Tanzania issue of December 2018, foreign reserves in November have fallen to $5,078.8 million from October's $5,277.8 million.

Foreign reserves have fallen by $421.7 million in three months, from the record high of $5,500.5 million in August 2018. The balance of payment deficit increased more than four folds in a month to record a deficit of $753 million in the month of November from $171.6 million in October 2018 on account of increased imports especially of capital goods to feed major infrastructure projects undertaken by the government.

A continuous deterioration of foreign reserves and increasing balance of payment deficit may put pressure on the stability of the shilling in the near future considering the persistent volatility of global oil prices, U.S tightening policies and uncertainties brought by ongoing trade wars between America and different trading partners most notably China.

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