Why block trading is on the increase at Dar bourse

Dar es Salaam. Performance of the Dar es Salaam Stock Exchange (DSE) improved in the past two weeks after a series of block trading activities which analysts say was done by institutions.

The bourse allows investors to trade outside the market by negotiating prices of stocks.

Last week, the DSE recorded a weekly turnover of Sh11.66 billion, the highest in three months after three counters traded over 3.9 million shares.

DSE’s report on Tuesday, April 6, 2021, also shows that the trend continued, whereby 333,400 shares were traded through block trading. Financial analysts say one of the main influencers was the participation of institutional investors who look at equities as a good investment for their cash.

The Director of Arch Financial and Investment Advisory Ltd, Mr Mazengo Kasilati, said the institutions opt to buy equities so that they can create wealth.

“Merely holding cash is not lucrative, so they’d rather put it in equities where it can create earnings over time, through dividend payouts,” he said.

The director of operations at Orbit Securities, Mr Juventus Simon, said that, “in previous years, there was little participation by local institutions in the financial markets. But, now, they are coming back into the market.”

According to DSE market reports, the locals were recently on the buying side in block trading, while foreigners dominated the selling side.

Mr Simon said this might be attributed to the impact of the Covid-19 pandemic on foreign countries which impose lockdowns and business closures - thus forcing prospective investors to exit so as to fulfill other obligations.

The DSE chief executive officer, Mr Moremi Marwa, said there have been prearranged block trades in the market during the past few weeks on some of the trading counters due to the transactions between institutional investors, both local and foreign.

But the trading is done as per DSE rules at negotiated prices “not related to the central order book.”