Investors hit as share prices fall

Dar es Salaam. Investors who bought CRDB, Tanga Cement Company Ltd (Simba) and Tanzania Cigarette Company (TCC) were on the losing end during the past nine months as the firms’ shares depreciated at the Dar es Salaam Stock Exchange (DSE), market data show.

For instance, the share price for CRDB Bank plunged by 37.5 per cent between January 1, 2016 while that of Simba and TCC dropped by 30.34 per cent and 26.65 per cent respectively.

To put this in the right perspective, an investor who bought CRDB shares on January 1, 2016 at a price of Sh400 per share lost a cool Sh150 when he/she decided to sell the same equity at a price of Sh250 last week.

In other words, if the investment was Sh10 million then it would drop to Sh6.25 million to reflect the changes which are basically influenced by the market forces.

The stock market reports indicate that eight of the 15 domestic companies which were listed on the Dar es Salaam Stock Exchange (DSE) before January depreciated during the period to October while only two counters of National Microfinance Bank (NMB) and TOL Ltd (TOL) gained.

NMB gained by 10 per cent to Sh2,750 while TOL appreciated by 5.26 per cent to Sh800 per share, according to the market reports.

“First of all, we have to acknowledge that it’s normal to experience market volatility which is driven by sentiment, economic trend and of course the situation in a particular time,” says the DSE chief executive officer Mr Moremi Marwa.

He says many stocks are dropping this year due to uncertain global growth in trading and investment activities, the collapse of commodity prices that affected some of commodity-reliance African countries, as well as rising debt for many African economies.

“The shock of global risk-aversion sparked by Brexit is also a factor into all this. These fundamental and sentimental based factors were on top of portfolio investors as they contemplate and make decisions in entry of continuance existence or committing to new investments in Africa,” comments Mr Marwa.

About 70 per cent of the DSE trading is held by foreign investors.

He adds that Tanzania exchange was even better compared to many bourses in Sub-Sahara Africa as it’s ranked third out of 26 in the third quarter. South Africa was on top followed by Namibia.

DSE has so far 18 domestic listed firms but three of them including the bourse itself were listed this year.

Other counters which depreciated with their percentage in brackets include Mwalimu Commercial Bank (MCB – 17.29pc); Tanzania Breweries Ltd (TBL- 12.2pc); Swissport (13.61pc); Tanzania Portland Cement Company Ltd (Twiga 23.67pc); and Dar es Salaam Community Bank (DCB- 23.68pc).

Five counters have remained at the same price since January and therefore investors could neither gain nor lose from their equity prices. They include Maendeleo Bank PLC (MBP), Precision Air Services (PAL), Swala Oil and Gas Tanzania (Swala) and Mkombozi Commercial Bank (MKCB).

Wealth depreciating

The 15 domestic companies which were listed before January had a market capitalization of Sh9.527 trillion in the beginning of the year but it had depreciated to Sh8.102 trillion on October 4 even as the bourse listed three more companies.

Yetu Microfinance PLC, Mucoba Bank PLC and the DSE which all have a market capitalization of over Sh18 billion were listed between March and August but the total wealth of the domestic listed companies dropped by about 15 reflecting the depreciation of the shares in most counters.

“Main investors in our bourse are foreigners and these people were cautiously trading after election and even when Britain was exiting from the European Union,” says Raphael Masumbuko, chief executive officer of Zan Securities Ltd, a Dar es Salaam-based brokerage firm.

However, Mr Masumbuko is optimistic that the market may stabilize in the future and probably gaining of some well-performing companies.

“When there are political and economic changes, the markets react and usually shares depreciate. At the same time there are people who want to exit either because of the depreciation or due to personal demand for cash. All these trends affect the trading,” says Mr Masumbuko. “Now that the political leadership is stable and we expect to see good performance of some listed companies then prices may recover,” he adds.

Tanzania removed restrictions on foreign investors who want to participate on the local stock exchange. Formerly, the foreign ownership of the listed equities was capped at 60 per cent of a firm but in 2014 this was scraped and foreigners can own up to 100 per cent of a listed company.

DSE listing

The bourse self-listed its shares in July after initial public offering that was oversubscribed.

The counter was trading at a more-than doubled price by early October. Its share traded at Sh1,320 on October 4 compared with Sh500 during the IPO. At some points in August, the counter reached Sh1,800 per share but later came down to Sh1,100 and now is gaining again.