The Dar es Salaam Stock Exchange (DSE) listed bonds are projected to grow faster at an average of 17 per cent in 2023 and 2024 attributed to the Central Bank’s mopping up liquidity and the government subsidizes to subdue inflation according to investment advisory firm Alpha Capital.
The Alpha Capital Head, Research and Analytics Imani Muhingo in the firm’s valuation report for December 2022 said however noted that the growth of listed Treasury bonds is forecasted to gradually slowdown to 5 per cent in 2028.
“We also project a 5 per cent annual growth of the domestic market capitalization, which translates to 6 per cent CAGR of equity listing fees. Equity listing fees has been estimated at 4 per cent of the domestic capitalization for the last four years, and we project the same for the forecasted period,” Muhingo said.
He added that apart from normal maintenance, there shall be no major capital expenditure on equipment and intangible assets, thus an average of 45 percent of the total cash from operations and interest income shall be reinvested into Treasury bonds and term deposits throughout the forecasted period.
“We forecast the collective investment into bonds and term deposits to grow from 24bn/- in 2021 to 50bn/- in 2028, equivalent to 89 per cent of total assets at the time. Our forecasts may be highly altered in case of a reallocation of such funds,” he added.
Muhingo said the collective return from both investments is forecasted at 14 per cent in 2022 similar to 2021, and slightly slows down to 13 per cent for the rest of the forecasted period due to dropping yields as the central bank enforces long term accommodative measures, partially offset by already purchased high yielding bonds and slight expected increase in deposit rates going forward.
He said the rise of deposit rates shall be a result of the increasing financial awareness in the society, establishment of new investment schemes and integration of the financial system. With that said, we forecast 10.5 per cent CAGR of investment income during the forecasted period.
“We forecast a 15 per cent CAGR of transaction fees for the forecasted period driven by rising bonds turnover with a CAGR of 13 per cent between 2022 and 2028 compared to 37 per cent during the last five years,” he said.
He added, “We also expect increased bonds secondary market activities from rising financial awareness, establishment of new collective investment schemes and impact of the partial liberalization of the capital account. We project a 20 per cent annual growth of equity turnover as local participation rises and from the eventual revival of foreign investors’ participation after the global economy stabilizes. Bonds and equity transaction fees are expected to be the major drivers of income from CSDR which is projected to account for an average of 13% of the total DSE Group’s revenue”