THE trading week has come to a close on a positive note amidst sell-offs and buy- interests as the benchmark All-Share Index (DSEI) appreciated by 15.68 points.
The domestic stock index (TSI) closed at 3,611.32 points, to reflect a growth of 1.29 per cent from the previous trading week.
Meanwhile, the market capitalization in- creased by 130.69bn/-.
At the close of market on Friday, 7th January 2022, the stock exchange market value currently stands at 15.94tri/- from 15.8 tri/- in the previous trad- ing week.
Market sentiments trend towards the bulls with the market differential being in favor of the advancers as the overall value gained by the 4 gainers surpassed the value lost by the 4 losers, which largely attributed by the increase in prices of CRDB, and NMB gaining 5.36 per cent and 9 per cent respectively.
Market turnover indicates how much trading activity took place on a given busi- ness day in the market as a whole, the Dar es Salaam Stock Exchange (DSE) equity trading activities has stemmed 2.563bn/- transacted between investors in the week ending Friday 7th January 2022.
The higher turnover was largely contributed by TBL: 2.0bn/-, NMB: 284m/-, CRDB: 143m/-, TCCL: 69m/-, TPCC: 25.9m/- and others: 17.8m/-.
Fixed income
During the week the Bank of Tanzania re-opened a 5-year treasury bond through an auction held on 5th January 2022 on what was the first Treasury bond auction of the calendar year.
The central bank had offered 116.5bn/- but the public bid stood at 101bn/-, an under subscription of 13.3 per cent.
However, in the end of the day the BoT subsequently award- ed 45.471bn/- to successful bidders.
Total bids received were 45, of which 40 were successful, the auction result indicates that investors continue to prefer the longer dated papers because they compensate the duration risk with a higher return.
For example, the 20-year Treasury bond has a coupon of 15.49 per cent per year and the 25-year Treasury bond has a coupon of 15.95 per cent, thus reducing appetite for medium term papers such as the five, seven and 10 year papers.
On the money market instruments, the 364 day- Treasury bill continued a streak of positive yield gain, reaching 4.99 per cent on the last auction held on 29th December 2021 gaining 10 basis points ending 2021 at weighted average yield of 4.99 per cent from 4.89 per cent recorded in the preceding auction, we could see a slight increase in the yield as the central bank will be auctioning treasury bills this week.
The policy implementation by the Bank of Tanzania leads to an expansion in reserves and an increase in funds available for lending.
The availability and the use of credit fa- cilitates the exchange of goods and services, the production processes and the growing importance of financial services in the Tanzanian economy.
It is hard to visualize an economy that works without credit.
As a result of the above growth of domestic credit continues to remain positive, domestic credit by the banking system, extended to the private sector and central government grew at an annual rate of 13.5 percent in November 2021, compared with 12.5 percent in November 2020.
Credit extended to the private sector con- tinued to recover, growing by 7.8 percent in November 2021 compared to a growth of 5.6 percent in October 2021 and 5.2 percent in the corresponding period of 2020.
The sustained recoveries of growth of credit to the private sector are largely attributed to accommodative monetary conditions as well as ongoing initiatives by the government to improve the business environment.
As per the Bank of Tanzania monthly economic review report, growth of credit to the private sector is expected to continue to maintain an upward trend towards the target of 10.6 percent set for 2021/22, supported by the implementation of policy measures recently rolled out by the Bank of Tanzania to foster credit growth and lowering of lending rates; continued recovery of the global economy; and sustained accommodative monetary policy.
Outlook
Stock Market Outlook
Our view of the market remains bullish as we forecast the domestic listed stocks–Tanzania Stock Index (TSI) to gain a few basis points as we start the year, reflecting a “glass half full” outlook based on still-strong cor- porate sales and profit growth resulting from acute economic growth, measured inflation and low interest rates.
These factors suggest a favorable backdrop for stocks, with the po- tential for more subdued gains when we enter second quarter of 2022 as companies prepare to release their 2021 audited financials.
Fixed income Market Outlook
As yields on the long end of the yield curve continue to fall we are likely going to see a humped yield curve, A humped curve is uncommon, but may form as the result of a negative butterfly, or a non-parallel shift in the yield curve where long and short-term yields fall more than intermediate one, we have already seen a sharp fall in 20 year paper yields currently trading at 13.8 per cent just 30 basis points above the 15 year treasury bond coupon.
Mr Masumbuko is a Chief Executive Officer of Zan Securities–a capital markets and securities authority licensed dealer and a member of the DSE. raphael.masumbu- ko@zansec.co.tz