(AFRICAN MARKETS) -- As we approach the end of 2016, Tanzanian stocks are headed for a flat or down finish. 2016 was a turbulent yet historic year for the Dar-es-Salaam Stock Exchange and arguably the hardest year to make any money. Almost all domestics stocks dipped in value bringing down the domestic market capitalization by 1.3 trillion shillings. The innocuous result belies a roller coaster year, to which many investors will likely say “good riddance” as we tread towards another prospectively momentous year.
Before we dive into the more grim parts of the year, we should spend some time to soak in the positives of the year. In July the investors witnessed the highly anticipated self listing of the exchange giving the DSE title of the third exchange in Africa to be self listed. As the investors waited patiently for over a year for the paperwork to materialize, to no surprise the initial offering was strikingly successful and inherently made the stock the most volatile stock of the year.
"Our IPO subscription was almost five times the amount we anticipated. With an increase of 35 per cent we accepted Sh10.125 billion from over 3,000 shareholders and unfortunately, we had to refund more than Sh26 billion to investors," the bourse chief executive officer Moremi Marwa said.
With the initial price of 500/- the stock peaked at 1,770/- and closed 2016 at 1000/-. If you were one of the lucky ones to be part of the Initial IPO, the stock provided a 100% return over night.
Along with DSE, there were two further domestic listings: YETU Microfinance (YETU) on the main investment market segment and MUCOBA Bank Plc on the Enterprise Growth Market. This brought the total number of listed stocks to 25 with 18 domestic companies and 7 cross listed ones.
Historically the DSEI all share index follows a cyclic pattern where the index peaks in the months of July and August and dips down again towards the year end. However, this year the natural decline was far greater than normal as the stocks quickly dissipated in value. The exchange giants, Tanzania Breweries Limited (TBL) and CRDB Bank (CRDB) along with the other local stocks felt major blows. Various factors dogged down both the banking sector and the industrial sector, per contra, almost all companies attributed the declining performance on the lack of liquidity in the economy due to drastic decrease in government spending.
The banking sector in the country took a major nose dive with the increase in the non-performing loans in the third and fourth quarter. The Banks, Finance & Investment (BI) index opened 2016 at 3000/- and was down by 8% by the year end. CRDB was the hardest hit and in Q3 of 2016 posted their first ever quarterly loss. The major loss and the prospect of reduced revenue gave various local investors cold feet. This swept away 400bn/- in market capitalization, with the share price dropping from 400/- to 250/-.
Such ill fate in the banking sector was only avoided by the National Microfinance Bank (NMB). With respect to long term investors, excluding the newly listed DSE, NMB provided the best return on investment. NMB opened the year at 2,500/- and currently swims around 2,750/-; bringing in a 10% YTD-appreciation. Along with the rise in valuation the bank declared a dividend of 104/- per share, making the annual return on investment just over 14%.
Similarly, the manufacturing sector had comparable grievances with the liquidity in the market. Tanzania Breweries Limited (TBL), the exchanges most popular & traded stock, is expected to close the year 19% lower at 12,000/-. Despite the price drop, the company posted a 6% growth in profit and a 20% higher divided at 600/- per share. Regardless, the investors expected a higher return. The firm’s board chairman Cleopa Msuya attributed the slow growth to the following: “Although the government did not increase excise duty rates, the economy continued to suffer from factors like lack of liquidity; a 25 per cent currency devaluation; a below inflation household income growth, and a stagnant agricultural sector growth which reduced the disposable incomes and consumption levels.”
The Industrial & Allied (IA) index tumbled by 22% in value, with cement stocks hardest hit. The cement market took a significant new turn in the country with the increased competition and slowdown in real estate development. The commencement of Dangote’s $500 million plant in Mtwara brought down cement prices from an average of $100/tonne to $80/tonne. The sudden drop in cement prices drilled cement stocks where; Tanzania Cement Company Limited (TCCL) share price took a 40% dive and Tanzania Portland Cement Company (TPCC) fell by 24%. However, with the prospects of massive government infrastructure projects, the cement market continues to have a brighter future in the next year.
On the tune for brighter news for next year, the deadline for Telecom companies to submit their proposals to list their companies approaches. Two of the largest operators Vodacom and Tigo have already submitted their paperwork to the Capital Markets and Securities Authority (CMSA), and are scheduled to have their IPO in the first half of next year. Both the companies are set to break all records in the history of the exchange. On the other hand, there are fears that with the prohibition of foreign investors to participate in the IPO, the shares will be undersubscribed.
The stock market outlook for 2017 has a bullish bias but which sectors of the market do better or worse partially depends how policies the government will implement. The new listings are destined to bring new capital into the cauldron, resulting in higher turnover and revenue for the DSE.
