DSE down 74pc as investors turn to Vodacom IPO, T-bond
What you need to know:
With nonperforming loans posing a threat, commercial banks are increasingly becoming cautious in lending, preferring to seek refuge in risk-free government securities
Dar es Salaam. The Dar es Salaam Stock Exchange (DSE) slumped by 74 per cent last week as retail investors’ appetite for Vodacom Tanzania’s initial public offering (IPO) was whetted.
With the ratio of Nonperforming Loans (NPLs) for commercial banks - relative to their total loans - growing from 6.4 per cent in 2015 to 9.5 per cent last year, it has become evident that most lenders are employing a cautious approach to lending, forcing them to seek refuge in the risk-free government securities.
The two factors became evident last week when the DSE turnover slumped to Sh462.38 million from Sh1.7 billion that was registered during the week ending Thursday, April 13. Only 389,748 equities exchanged hands last week, being a 16.18 per cent drop.
TBL – which contributed a cool Sh313 million (about 68 per cent of last week’s turnover) – traded at Sh12,000 on Wednesday but the price declined to Sh10,200 and Sh10,300 on Thursday and Friday respectively.
“In my view, after the extension of the Vodacom IPO, investors – mostly retail ones - are now putting much of their resources in the primary market (the IPO). As for the better performance of the bond market, that would an indication that institutional investors are putting much of their funds in the risk-free government securities,” said the Zan Securities chief executive officer, Mr Raphael Masumbuko.
On Wednesday, TBL transacted 22,993 shares to contribute Sh275.916 million to that day’s Sh291.77 million turnover.
However, while local investors accounted for 99.7 per cent of the sold equities, their foreign counterparts bought 94.11 per cent of the shares, suggesting that locals – who are legally allowed to take in the ongoing IPO – are selling their equities to participate in the primary market proceedings.
Foreign investors cannot take part in the IPO.
Vodacom Tanzania seeks to raise Sh476 billion through sale of its 560 million shares at a price of Sh850 each in the ongoing IPO as the telecommunication firm offloads 25 per cent of its stake to the public in compliance with the Electronic and Postal and Communications Act, 2010 as amended by the Finance Act 2016.
