Market analysts express mixed feelings on performance of Dar equities market

Market analysts have expressed mixed feelings on the performance of the Dar es Salaam Stock Exchange (DSE) with some painting a rosy picture for the equities market while others believe that the market  is likely to experience decreased liquidity and heightened volatility as a result of tightened monetary policies in developed nations.

According to the Alpha Capital Head of Research and Analytics Imani Muhingo, global central banks are expected to maintaining their course of tightening monetary policies through increased interest rates, there could be a significant shift of capital from emerging markets to developed economies.

“This movement is driven by foreign investors’ pursuit of higher returns, and its consequences can be felt across the stock markets of developing nations including Dar es Salaam stock exchange,” he said.

He added that the ongoing foreign currency reserve shortage especially in developing economies has been a contributing factor to the dollar’s appreciation against local currencies, diminishing the value of assets for investors holding their investments in alternate currencies.

“Consequently, this may deter foreign investors from purchasing stocks in developing economies. Since the relaxation of regulations regarding foreign investor participation back in 2014, they have played an integral role in driving activity at the DSEmarket.

He added, “However, it is expected that turnover and volume will continue to decline over the next six months”

The second half of 2023 started on a positive note, as the benchmark indices DSEI and TSI showed growth of 1.99% and 0.44% respectively resulting in an increase of 298.78bn/- in total market capitalization and 43.30bn/- in domestic market capitalization.

The Zan Securities Chief Executive Officer Raphael Masumbuko however still predicts a positive outlook for equities in 2023, with some local stocks still considered slightly undervalued despite positive earnings momentum and sentiment.

“Our analysis indicates that there will be record earnings growth this year, primarily driven by the banking, industry, and property sectors. Looking ahead, we expect increased market activities in the coming weeks as companies prepare to release their second-quarter financial reports, generating more interest and trading,” Masumbuko said.

The Central Bank plans to continue implementing a less accommodative monetary policy in the fiscal year 2023/24 to achieve inflation and growth targets.

In the first half of the year, the current monetary targeting framework will be used for policy implementation, while in the second half, an interest rate-based monetary policy framework will be employed.