A trader looks at his screen in the trading room of the Dar es Salaam Stock Exchange. (Photo: REUTERS / Katrina Manson)

Trading on the Dar es Salaam Stock Exchange is expected to pick up as yields from fixed income securities and money market instruments keep on falling.

The stock market’s turnover last week dipped by almost 78 per cent as money investors eyed risk free government securities that have in recent days offered lucrative yields of between 13 per cent and 18 per cent. On average stocks’ dividend yields per year is around 10 per cent.

Business Analyst with Tanzania Securities Joel Nkya says improvement is expected this week in the level of trading activities on the tiny bourse following signs of dwindling treasury bills and bonds at the primary market. “…yields for fixed income securities and money market instruments keep on falling amid easing of the tight liquidity policy by the central bank,” Mr Nkya said on the stock brokerage firm weekly report.

Turnover, for the market that ended on second Friday of this month, dropped by 77.85 per cent to close at 274.38m/- from sales of 498,722 shares. Early this month, the 365 days Treasury bill auction saw the yield rate cut to 15.30per cent from 18.44 per cent of previous month.

But despite, the cut in yield rate, huge amount of 440.32bn/- was tendered. The central bank accepted only 100bn/-. BoT’s Director of Economic Research and Policy Dr Joe Masawe said the central bank would continue to accept the announced amount despite seeing oversubscription. “We haven’t changed our monetary stance yet.

The bank will accept the announced amount for now,” Dr Masawe said: “This tells us that there is access liquidity in the market but we cannot accept the entire tendered amount as that will push-up interest rates in the market and affect macroeconomics fundamentals.”

In last week TB auction, the central bank accepted 46 per cent more than the amount it had offered for sale as the bank offered 100bn/- worthy of securities but accepted 146.7bn/- out of 273.2bn/- tendered during the auction. It is the first time the BoT has received more than its target in 2012, although recent trends have seen investors oversubscribe government securities while the weighted average yields slowed down.

Dr Masawe said at the moment does not target exchange rate nor change from flexible to band exchange rate regime. The latter regime put the exchange rate in a band and the central bank intervenes to make sure the rate does not go outside the set band—the highest and lowest rates.

“Our policy is not to target the exchange rate but to stabilise the shilling by maintaining money circulation,” Dr Masawe said adding, “We have to balance between intervention and T-bills interest rates to avoid distorting the market.” Standard Chartered Bank said last Tuesday interbank overnight rates trended slightly upward with the highest offer rate at 10.5 per cent while the lowest rate remained artificially at 1.0 per cent.

“The secondary market demand for assets remains high, with five-year papers seeing strong purchase at 13 per cent,” the bank said in its daily market statement.

Stocks also face challenges from commercial banks as of recently they increase the deposits ratios. The First Nation Bank (FNB), a division of FirstRand Bank opened its doors recently, coming up with competitive rates which forced National Microfinance Bank (NMB), the biggest bank in terms of profit and network, to follow suit.

FNB offers up to 13.5 per cent return for 12 months deposits while NMB gives 8 per cent of the same time deposits. Mr Nkya says to mobilise deposits, banks have started to offer very competitive rates on fixed deposits, a challenge to stock market.

By ABDUEL ELINAZA, Tanzania Daily News

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