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*By YAKOBE CHIWAMBO (Businesstimes.co.tz)
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HITHERTO, both local and international investors had been making a beeline
for long-term bonds – mainly because of their relatively higher yields and
secure nature as an investment. That scenario is rapidly changing, with
prospective investors now sitting on their money and furiously reading signs
of the (economic) times.
Observers attribute this incidence of burgeoning caution to renewed
uncertainties even as some of the Big Economies of the world enter a new
phase of economic uncertainties.
Reports are already surfacing to the general effect that the world’s Big
Economies – including that of the most powerful nation, the USA, and the
PIIGS countries: Portugal, Ireland, Italy, Greece and Spain – are already
showing signs of staggering towards the brink.
This is being attributed to the controversial debt status of the United
States, which led to the downgrading of the world’s biggest economy by
Standard & Poor (S&P) from Triple-A (AAA) to AA+ this month!
Tanzania can be no exception in that economic fate. The country has been
experiencing
considerable economic difficulties that include severe power
rationing, a relentlessly depreciating national currency, the Shilling, and
a high inflation rate that is already in double digits, having risen from
five per cent early this year to 13 per cent today!
As a result of global and local factors – and after a spate of
over-subscriptions in biddings by prospective investors for long term bonds
– the situation on the ground has rapidly changed.
For instance, a recent auctioning of a Tsh40-billion five-year bond by the
central Bank of Tanzania (BoT) saw a 27.5 per cent under-subscription,
whereby only bonds worth Tsh29 billion in total found potential takers!
According to the relative auction summary, while BoT received 36 tenders in
all, only 25 of them made it through – with the successful bids realised
totalling a mere Tsh9.5bn out of the 40 billion!
This should come as a surprise, considering that for a long ti,e in the
recent past, most of the big investors single-mindedly went for long-term
bonds whose returns are far higher compared to those from fixed term deposit
at the traditional banks, and Treasury
bills.
Generally, fixed deposits and Treasury bills offer up to six per cent
interest, when long term bonds offer ten per cent and above.
According to the ‘Weekly Market Review’ that is prepared by Tanzania
Securities Limited, high-interest rates and tight liquidity, worries related
to the ongoing tough economic environment, investors fear that, with
confidence in the prospects of the global economy waning, greater caution is
called for when dabbling in the financial markets.
In the event, activities at the Dar es Salaam Stock Exchange this week saw
the banking segment accounting for 74 per cent of the total volume traded,
and 43 per cent of the turnover
transacted.
The NMB (National Micro-finance Bank) was the most active counter at the DSE
with a volume of 196,400 shares traded for a turnover of Tsh169 million.
However, it’s stock remained flat at Tsh850 a share – as was the previous
week.
This was the case despite the relatively strong performance in Q-2 of 2011,
whereby NMB’s profitability improved by 3.6 per cent, from Tsh15.1bn in
Q-1/2011 to Tsh15.7bn in Q-2/2011.
Year-to-Date (YTD), NMB has posted a robust earnings
growth, up from Tsh27.7 billion as of June 30, 2010 to Tsh35.1 billion for
the period which ended on June 30, 2011.
On the same note, the CRDB Bank counter transacted a volume of 197,254
shares for a turnover of Tsh36 million. This was the lowest level at that
counter for a single week since the beginning of the year!
CRDB also published its second quarter financial statement, during which the
bank posted a decrease in its earnings (7.6 per cent) compared to the
previous quarter, and recording a profit of Tsh14.6bn compared to a net
profit of Tsh15.8bn posted in the previous quarter.
This was mainly attributed to the impairment losses on Loans &
Advances that increased by 115 per cent, from Tsh3.4 billion in Q-1 to
Tsh7.2 billion in Q-2/2011!
At least 27,198 shares exchanged shares at the DCB (Dar Community Bank)
counter for Tsh15 million. The stock recorded a slight improvement during
the week where it transacted and closed the week at Tsh550 a share – up from
Tsh540 the previous week.
During Q-2/2011, DCB posted marginal growth in its profitability. The bank’s
earnings edged up by 13.1 per cent, from the Tsh778 million recorded in the
previous quarter to Tsh880 million posted in this quarter.
Apart from the banking sector, generally speaking the market slumbered
further during the week, with activity recorded in previous weeks getting
eroded. Turnover dropped 111 per cent to Tsh570 million, down from the
Tsh1,072 million transacted previous week.
Activity levels also recorded a significant reduction. The
week-on-week volume decreased 385 per cent – to 565,391
shares – compared to the 2,739,753 shares traded the previous week!
This is one of the poorest weekly performance since the
beginning of the year – and the single largest decrease in
activity and turnover since the May!