Dar bourse braves Ukraine war as investor wealth rises by Sh90 billion in one month

Dar es Salaam. The Dar es Salaam Stock Exchange (DSE) has remained stable during the past one month despite the ongoing war between Russia and Ukraine, which has resulted in a rise in commodity prices and tensions in some equity markets globally.
Available data shows that during the past one month, investors at the DSE have gained Sh89.35 billion in paper wealth as a result of improved stock value for domestic listed firms.
Market data by the DSE shows that seven counters, including  domestically-listed equities, gained during the past month.
Russia attacked Ukraine on February 24 after what Russian said was a seven-year standoff over the latter’s failure to implement the Minsk ceasefire agreements which sought to end the war in the Donbas region of Ukraine. The US and its Western allies have branded the war as “Russia’s invasion of Ukraine”, and have imposed harsh sanctions that seek to lock Moscow out of the global economy.  
Data shows on Friday, February 25, 2020, just a day after the war started, domestic market capitalisation stood at Sh10.04 trillion. However, this had risen to Sh10.13 trillion at close of trading on Friday March 18, 2022.
This was largely due to gains at the Tanga Cement Company Limited (TCCL) counter whose stocks had gained by 24.19 percent to Sh1,540 by Friday last week from Sh1,240 on February 25.
Nicol was the second market gainer with 15.9 percent after its share price rose to Sh400 from Sh345 during the same period.
DCB Commercial Bank has gained to Sh195 a share from Sh170, equivalent to 14.7 percent, followed by Tanzania Portland Cement Company Limited (TPCC), alias Twiga Cement, with a 9.5 percent gain to Sh4,120 from Sh3,760.
Other gaining counters include DSE which rose 2.8 percent to Sh1,440 from Sh1,400 and CRDB Bank Plc, which rose by 1.42 percent to Sh355 a share from Sh350.
DSE chief executive officer Moremi Marwa said the increased activities at the local counter reflect how liberal the Tanzanian economy has become, with improvement in the business environment and trade activities.
“There is satisfactory money in circulation, and an opening up of economic activities,” he said.
With regard to the ongoing conflict, Mr Marwa said while the local equities perform well, cross-listed firms, on the other hand, have been impacted as the Nairobi Securities Exchange (NSE) started feeling the pinch of the war.
“It seems that NSE is more reactive to the ongoing geopolitical tension compared to our market,” he said.
During the past month, media giant Nation Media Group (NMG) was the only cross-listed firm that gained with a 5.2 percent increase to Sh400 a share from Sh380 that was in February.
Mr Marwa says overall liquidity of the bourse has slightly declined due to the slowdown of foreigners’ participation.
“However, there is no pressure to sell, that is why prices for the majority of the listed firms have remained stable,” he said.
Financial analyst and expert Mohamed Warsame also agrees that the ongoing war could to some extent affect the foreign investors’ risk appetite into a downward trend that could affect portfolio inflows to Tanzanian domestic financial markets.
“However, since Tanzanian equities are trading at a reasonable valuation and  performing well with rising growth expectations especially for the  larger listed equities, impact is not expected and potentially we could see  Inflows as investors perceive Tanzania to be an attractive market to deploy capital at these valuation levels,” he said.
Prof Warsame added that while the war escalates, the direct impact on the capital market is expected to be low, although there are indirect effects through the global economic impact.
He said short and intermediate term effects include imported inflation as the rising prices for imported goods would result in rising expectation on inflation, therefore also expectations   on interest rates and exchange rates  in the financial markets depending on the actions taken by the monetary authorities.
He said the direct effects on sectors like tourism and/or the logistic sector may cause supply chains disruption, shipping costs and delay deliveries of raw materials and capital goods for projects.
Moreover, on equities market prospects stakeholders say it would continue to perform well as the result of degrading fixed income rates.
Brokerage firm Zan Securities Limited chief executive Raphael Masumbuko said, “So far in 2022, we have seen a return to the equities market as a result of falling treasury yields. This has coincided with a rise in the local equities market, which has also improved the Tanzania Share Index by 7.5 percent year to date.”
Mr Masumbuko said rates in the fixed securities market are expected to continue falling, positively impacting equities activity.