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Tanzania: Tanzania Share Index Drops as JATU Maintains Downward Trend

DESPITE a change of the tide on the last trading session of the week, JATU still managed to trivially suppress the Tanzania Share Index (TSI) after the counter dropped by 23.15 per cent on a weekly basis.

JATU opened the week at a price of 1,080/- then closing at 830/- on Friday 05th February 2021 after hitting 760/- on Thursday 04th February 2021. Interest on the counter seems to have regrouped after closing with outstanding bids of 6,890 at the session’s highest price of 830/- while the counter had zero offers.

The Tanzania Share Index (TSI) went down by a 0.2 point due to a pull down by JATU Plc. TSI closed the week at 3,522.13 points. Correspondingly the domestic market capitalization dropped by 0.006 per cent to a total of TZS 9,260.49bln ($4.01bln).

The total market capitalization on the other hand appreciated by 2.33 per cent to a high of TZS 15,219.89bln ($6.59bln) and as a result the All Share Index (DSEI) climbed by 41.76 points to 1,831.94 points. The climb of the DSEI was a result of the cross listed giants, East African Breweries (EABL) and KCB Bank (KCB), which climbed by 11.2 per cent and 4.05 per cent respectively.

National Media Group (NMG) and Jubilee Holdings (JHL) both fell by 12.9 per cent and 2.56 per cent respectively. Uchumi Supermarket (USL) remained stationary while Kenya Airways (KA) remained suspended from trading due to the undergoing acquisition process by the Kenya government. The total equity turnover fell by 32.1 per cent while the volume of shares traded dropped by 89.6 per cent due to a slowdown of activities on the CRDB counter while concentrating on high prices counters, TCC and TBL.

The total turnover during the week amounted to TZS 2.95bln ($1.28mln) while the volume of shares amounted to 0.75mln traded in 256 deals. The top mover of the week was Tanzania Cigarette Company (TCC) which accounted for 56.9 per cent of the total realized turnover.

TCC traded a total of 280,000 shares at a price of 6,000/-, in one deal, in a prearranged block transaction. The transaction went through at a 65 per cent discount from the official market closing price of 17,000/-.

TCC was closely followed by TBL which accounted for 31.4 per cent of the total turnover after moving 150,853 shares at a weighted average price of 6,145/-. Majority of transactions still go through the prearranged board and making up the majority of the equity turnover.

Most prearranged transactions go through fractions of the official closing prices of the respective counters, creating a Net Asset Value calculation paradox for fund managers invested in companies listed on the Dar es Salaam Stock Exchange.

Fund managers use the official closing prices of listed counters in the calculation of their Net Asset Values. In a scenario where a significant majority of transaction is executed at more than 50 per cent discounts in prearranged block transactions, the official closing prices become unrealistic, creating a peculiar difficulty in the holdings’ valuation by these fund managers.

The case is with various counters on the Dar Exchange, most notably TBL, TCC and NMB. A bigger challenge is with open-ended fund managers who buy these counters at such discounts while still using official closing prices for valuation because immediately after settlement, the Net Asset Value of such funds appreciated by the unrealistic proportion of the discount.

The final beneficiaries of this are withdrawing unit holders who are allowed to cash-in the unrealistic immediate returns. While net buyers of CRDB, foreign investors were net sellers of TCC and TBL, ending the week on a net seller position. Foreign investors accounted for 80.2 per cent of the total divestments while local investors accounted for 76.7 per cent of the total investments made during the week.

The net foreign outflow was $0.73mln. Market, Bills and Bond Due to zero bids, the 35days, 91days and 182days tenors were cancelled, while the 364days tenor was oversubscribed by 94 per cent. The central bank offered a total of TZS 84.53bln ($36.59mln) while the public tendered a total of TZS 164.2bln ($71.08mln) in 83 bids.

The Bank accepted a total of 54 bids worth TZS 119.3bln ($51.65mln) which is 141 per cent of the offer and 73 per cent of the tender size. The weighted average yield rose by 45bps to 5.67 per cent compared to 5.22 per cent during the previous Treasury bills auction.

Currency Market While the value of transactions on the Interbank Foreign Exchange Market (IFEM) is still minimal, the value has further dropped during the week under review, by 21.2 per cent to a total of $3.04mln.

The weekly value of transactions on the IFEM has been lower than $4mln since the third week of January from significant magnitudes of above $10mln during late December.

Further the shilling has shown consistent marginal depreciation since the third week of January, indicating possible tightening foreign exchange liquidity in the banking sector.

The Bank of Tanzania’s Monthly Economic Review for December 2020 reported that the central bank had a net purchase position of $73.6mln during December 2020, out of the total monthly transaction value of $109mln, first monthly net purchase position for the year 2020.

A net purchase position indicates that the central bank is mopping up extra liquidity from the banking system.

From recent weeks’ reports it seems the liquidity position has tightened compared to that of December which needed mopping.;