The stock market in Tanzania was one of the few sectors of the economy that defined resilience in its true sense in 2022 amid global shocks including inflationary pressure that saw many stock markets globally on their knees.
On a very positive note however, The Tanzania Share Index (TSI) rose by 9.1 per cent in 2022 compared to 2.9 per cent in 2021.
According to the Dar es Salaam Stock Exchange (DSE) data, the growth was equivalent to investors’ paper wealth gain of 853.17bn/- recorded in one year.
The growth was driven by the financial services companies including NMB, CRDB and DSE, which saw prices go up by 51 per cent, 41 per cent and 31 per cent respectively as a result of impressive business performance a year prior that restored investors’ confidence.
Other major gainers during last year were SWISS whose stock increase by 32 per cent and TOL whose stock rose by 21 per cent respectively.
On the other hand, the All Share Index (DSEI) slightly fell by 0.8 per cent as the Nairobi market negatively reacted to global economic woes during the year.
On top of the impact of cross listed counters, some domestic counters were culprits to the fall of the DSEI with TCCIA Investment Co. Ltd (TICL) falling the most during the year as its stock dipped by 56 per cent as investors grew appetite for the counter due to consecutive growth in profits.
The increased demand in TICL came with a sentiment that the counter was overvalued resulting into the significant drop of the price away from its net asset value to a fairer value guided by free cash flow valuation.
Other losers for the year were Mwalimu Commercial Bank (MCB) whose stock fell by 36 per cent, JATU whose stocked fell by 30 per cent, DCB Bank whose stock fell by 21 per cent, Maendeleo Bank Plc (MBP) whose stock fell by 19 per cent and Swala whose stock fell by 8 per cent.
With the exception for the troubled JATU which fell under is still under investigation for fraudulent activities, all other counters saw price declines as a result of poor performance.
Available data further shows that the total equity turnover grew by 28 per cent on an annual basis, to 133.24bn/- with CRDB accounting for a third of the total equity turnover while NMB accounted for 25 per cent.
Collectively, CRDB and NMB accounted for 57 per cent of the total equity turnover, followed by TBL which accounted for 19 per cent of the turnover while the collective rest of active counters accounted for less than 25 per cent of market activities during the year.
Data also shows that local investors’ dominance in the stock market has grown significantly in the last two years, from 2.1 per cent recorded in Q4, 2020, to 54.2 per cent in Q4, 2021 and 93.4 per cent in Q4, 2022.
The growth of domestic investors’ participation is attributed to continuous awareness and financial literacy campaigns undertaken by the authorities and private parties and the growth of disposable income is another factor.
Foreign participation consecutively waned on a monthly basis since the beginning of the year. Foreign purchase accounted for 78.4 per cent of the total investments for the month of January, and this dropped to 57 per cent in June, 9.5 per cent in October and 3.3 per cent in December.
A drop in foreign participation is explained by global economic developments, especially with the energy crisis in Europe caused by the Ukraine conflict, raging inflation in the US and Europe and reactions of central banks across the world which raise currency risks in emerging economies, hence global investors preferring safe havens in USD denominated fixed income securities.
During last year, the government partially liberated the capital account, to allow foreign investors presiding the SADC and EAC region to participate in Treasury securities auction and be able to own Treasury securities.
According to Alpha Capital Head of Research and Analytics Imani Muhingo, the appetite from the region is still rare due to rising interest rates globally.
“We expect to see interest when the global economy stabilizes. This should further raise the transactional to turnover ratio and lower Treasury yields, and subsequently boost banks’ lending to the private sector,” he said.
Muhingo noted that albeit fears of a global recession in the first half of 2023, he expects an outstanding year for the Tanzanian capital markets and a splendid performance from the banking sector.
“We expect more than 50 per cent growth in dividends from the two largest banks, CRDB and NMB, which shall be a significant boost in the banks’ prices hence the TSI. We expect to see increased local participation, as well as a revival of foreign investors when the global economy stabilizes, which shall be a further boost to prices and indices,” he added.