Domestic equities remain resilient despite Covid-19

Dar es Salaam. The resilient performance at two trading counters in the first quarter of 2020 (Q-1/2020) was a plus for local listed companies at the Dar es Salaam Stock Exchange (DSE), which has been adversely impacted by the global Covid-19 pandemic.

The viral disease has eaten into the bourse’s innards, so to speak. In consequence whereof its valuation – as measured by market capitalization – declined by a whopping Sh2.5 trillion in the three months to March 31, 2020 following a decline in share prices of all cross-listed companies.

Firms from Kenya’s Nairobi Securities Exchange (NSE) lost Ksh573 billion (about Sh12.6 trillion) of their value in the past two months as the spread of the coronavirus, compounded by other economic headwinds, spark an exit of foreign investors.

DSE has six stocks cross-listed from NSE, all of which have been losing, thus adversely impacting the DSE’s value.

However, a quarterly note from the DSE’s CEO, Moremi Marwa, for the period to March 31 states that the value of the domestic firms had actually increased by two percent, to Sh9.15 trillion, powered by CRDB Bank and Twiga Cement which gained by 47 and 10 percent respectively.

“So far, so good for the domestic equities and bonds. But, let’s see how the next quarter will be like. Anything can happen,” said Mr Marwa.

Other Tanzanian counters whose performance declined were Swissport (10 percent), TOL Gases (9 percent), DSE Plc (9 percent), TCCIA Investment (9 percent) and Nicol (3 percent). But the impact was offset by the gains made by CRDBand Twiga Cement.

Share prices of 15 domestic listed firms remained unchanged in the quarter under review, according to the DSE report.

The DSE benchmark All-Shares Index - which captures movement of all stocks - declined from over 2100 points in February to 1757.59 points on Friday.

However, the market was still above Kenya and Uganda in this, while Rwanda was at the top in terms of performance in the region, according to data by Bloomberg Terminal.

DSE is also above other African Stock Exchanges, including Johannesburg and Nigerian Stock Exchanges, as well as the Egyptian, Lusaka and Namibian Stock Exchanges in the year to-date as tracked by Investing in Africa, the online guide to the continent’s stock markets.

Prospects

CRDB’s rise was said to have been influenced by two large investors in February who bought shares in bulk. The Twiga Cement trading counter was also dominated by shareholders who aren’t speculators and who don’t rush to quit trading.

Experts are optimistic that the future might be bright - considering that the coronavirus outbreak would have be en contained or investors cope with the new normal.

“If the government decides to boost equity demands by buying in secondary market, it’s help. But the future depends on specific company performance,” said Mr Semboja Lukwaro, head of stock brokerage at Arch Financials and Investment Advisory.

Trillions of dollars pledged to offset the economic impact of the deadly virus have provided a semblance of stability to world markets, which were hit by the rapid spread of the disease, virtually forcing the global economy into lockdown.

“We are in a season where investors are expecting dividends from their companies and, therefore, the bourse might be stable,” said Mr Mizengo Kasilati, TEG Consultancy’s managing director.

“The crisis we face can be short-term and, after a few weeks, things could come back to normal,” he added.

The DSE has 27 listed companies, including those from Kenya. The bourse had a market capitalization of Sh14.59 trillion by close of business on Friday.