Shock and surprise as Dar es Salaam Stock Exchange record zero trading

Dar es Salaam. Zero trading of equities at the Dar Salaam Stock Exchange (DSE) on Friday last week sparked debate at the weekend as financial experts and analysts took turns to explain what it meant.
The bourse which is yet to recover from the losses ignited by the Covid-19 pandemic  traded government securities valued at Sh16.7 billion Friday.
But there was no activity at the equities counters.This raised some analysts’ eyebrows, as the incident was unusual.“It’s highly unusual for a 20 year+ established Stock Exchange to have a trading volume of zero; the whole trading day without a single share being traded.
 “Not even a cent! One for the financial history record books,” twitted one financial analyst, Prof Mohamed Warsame.In a rejoinder, however, DSE Plc’s CEO, Moremi Marwa, said such occurrences were normal in the equity trading business.
“No. It is not abnormal for a market to experience NIL trading activ-ities in one or more of its segments,” Marwa said.He said the incidence was, rather, a mismatch in share prices between offers and bids from investors.“
A transaction happens when prices on offer and the available bids match.
This was not the case on Friday,” Mr Marwa explained further  adding that the DSE has been feeling the pinch due to the Covid-19 effects on the global as well as on national economies.
By impacting foreign investors negatively, the pandemic was also impacting local bourses adversely.
This, he said, was because foreign investors basically account for the lion’s share (mostly up to or more than 90 percent) of trading activities at the DSE.
“Given the Covid-19 impact, foreign investors have significantly reduced their investment activities on equities. They are mostly on the ‘sale side’ which exerts pressure on prices,” he said.
As of last week, there were over six (6) million outstanding offers worth Sh6 billion - with just 20,574 bids from prospective investors.
The head of Research and Analytics at Orbit Securities, Mr Imani Muhingo, also said the Zero trading on Friday was unusual... But he hastened to say that it could be explained by a collapse in demand.
Investor demand has transi-tioned into much safer long-term securities such as bonds, gold and hard currencies, he explained.
Analysts, however, remain opti-mistic that things would soon enough change for the better.
“However, as global economies continue to reopen in the wake of easing lockdowns as Covid-19 infec-tion cases dwindle, investors’ optimism is expected to rise and push more demand into the market,” said the director of Arch Financial and Investment Advisory Limited, Mr Mazengo Kasilati.
Mr Marwa played down assumptions that the lower transaction levels at the DSE could partly be explained by an amendment of price discovery regulations which was done in July last year.
DSE changed the trading rules regarding the reduction of the block trade threshold, and on percentage variation on the touchline price.
 Under the rules which became effective in July last year after receiving the endorsement of all players, including the Capital Markets and Securities Authority (CMSA) the block trade threshold was reduced from Sh1.0 billion to Sh200 million.
But Mr Marwa said: “There is no evidential relationship between the two”.
He said what stakeholders and interested parties need to address is the issue of declining liquidity.
This includes putting more emphasis on the participation of pensions funds and the role of collective investment schemes funds managers which are key to liquidity creation in any stock market.
 “For us, in the last two-and-a-half years, pensions funds have not participated in the market. As a market, we structurally do not have fund managers and robust institutional investors in our markets who, under normal and unusual circumstances alike, would be sources of liquidity and market making,” he said.