END-OF-YEAR effects have begun taking their toll on the Dar es Salaam Stock Exchange (DSE), triggering a high supply of shares for sale as demand nosedives, according to sources close to the market.
“A sharp price decline across-the-board will be nothing out of the blue between now and December 31,” said a veteran stockbroker who preferred anonymity.
Commenting on the current trend of trading on the bourse, share agents agree that none of the listed firms dominates the market. But daily transactions show the National Microfinance Bank (NMB) as a leading mover of shares on the DSE, whilst those of CRDB Bank proceed with jolts and bumps at low prices.
Agents said that according to stock exchange norms, year-end effects influence all shares on the market. They explain the situation as being the result of how would-be buyers and sellers project their cash flows, taking into account business and private commitments such as the usual travel, partying and holiday expenses as well as school fees.
Even companies in the money share the same sentiment because, as one broker put it, “They want to close their books in a good image instead of rushing into buying shares.”
Since such firms want to conjure in the public mind a picture of liquidity, they reject buying shares at this time around until January, when they expect to bounce back with a bang. Therefore, there should be no deception that the low activity is inconceivable.
“Don’t expect big trading at this time. Most of the shares are likely to suffer a sharp decline in prices from this week until December 31 because there is a high supply and a low demand of shares in the market,” a stockbroker told THISDAY at the weekend.
It is a supply-based market where some expert observers see year-end effects knocking on with a higher impact, compared to stock markets in developed economies. Their outright advice based on experience is: ‘Buy now. This is the best time to invest in stocks’.
As the old adage in business goes, it is advisable to buy cheaply and sell later at a higher price. For everybody interested in making money, that’s the most appropriate way to make big gains from small savings.
Some local investment advisers wonder why the public fails to take the information about trading on the DSE positively. For instance, they said that the rush for shares in Twiga (Tanzania Portland Cement Company) has lulled following completion of the company’s expansion project.
On the contrary, if buyers were looking forward to increased dividends they should have a greater appetite for Twiga shares because the plant’s expansion and modernisation goes with doubled output that would lead to higher profit.
In another scenario, the DSE currently experiences a force of supply in CRDB shares because, as another stockbroker put it: “Our investors are not real investors but speculators. When the share price falls, people are desperate to sell their shares…they don’t focus on long-term prospects.”
Though the country's finance houses don’t give an impression of troubled assets in need of a quick rescue, the people’s pockets are flabby as the avalanche of shares put up for sale on the DSE attests.
A glimpse on the trading post, at least, gives an inkling of the economic and social difficulties the country faces in the 21st century..
Over the past 48 years of independence, the people have trodden both the socialist and the capitalist routes in a bid to catch up with advanced nations. Though proud of their achievements, theirs still ranks among the world’s least developed countries.
The DSE emerged out of the country’s latest turn to science and technology, which embody information and communication, with the aim of engineering a sphere fit to eliminate most, if not all, of the ills of underdevelopment.
In the first decade of its existence, the stock exchange hasn’t succeeded too well in turning around the general public outlook as regards to the buying and selling of securities. Many people think there could be better ways to make profit from their meagre savings.
“There are incentives for people wishing to invest in shares, but the products currently traded on the DSE are few,” said Laurean R. Malauri, chief executive of Orbit Securities Company Limited.
When CRDB Bank announced its initial public offering of 150/- per share ahead of the bank’s listing on the DSE, people rushed to empty their coffers and seize the chance of being shareholders of a promising finance house.
Half a year on the trading post, the bank’s shares are just a sideshow. Public enthusiasm has waned simply because, contrary to widely held expectation, the value of the shares has dramatically declined to almost the IPO level.
As an infant, listed at the time when worldwide recession peaked and poisoned business, CRDB could baffle aces in securities markets had it put up a strong run. The bank’s speculative shareholders who had focused on the likelihood of gaining higher returns within a short period of time must keep their fingers crossed.
Things went well at the time the National Microfinance Bank (NMB) started trading shares on the DSE two years ago. Buyers and sellers gravitated to the market because the rising share price buoyed their positive response.
But when the going gets tough, it’s not the time to throw down the gauntlet. As stock dealers suggest, this is where the shares market becomes a good gauge for any investor.