Tanzania: 25 year bond auction affects DSE trading

The Dar Es Salaam Stock Exchange (DSE) has experienced a significant impact due to the auctioning of the 25-year Treasury bond, driving the market into bearish territory. The 25-year bids soared to a record high, reaching approximately $276 million, which accounted for nearly 4.5% of the total size of listed Treasury bonds on the DSE. Salum Awadh, the CEO of SSC Capital, shed light on the market dynamics and the implications of the bond auction. One of the government's objectives in issuing the 25-year bond is to extend the maturity of its debt, a move that has garnered positive attention from investors seeking long-term investment opportunities. The bond market has shown minimal activity over the past five days, leading to increased interest in the new bond issuance with its attractive yield. This surge in demand reflects investors' preference for coupon payments over maturity returns, indicating a growing confidence in the market. President Magufuli's efforts to instill confidence in the financial and investment sectors have contributed to this positive shift, as investors gravitate towards long-term securities amidst underperforming equities. The equities market has faced liquidity challenges, with capital flight observed in recent months. Despite some companies reporting strong financial performance, these results have not translated into increased market activity. To revitalize the equities market, Awadh emphasized the need to educate and raise awareness among potential investors, in addition to encouraging more Initial Public Offerings (IPOs) to attract new participants. Tanzania currently has fewer than 30 listed companies on the stock market, highlighting the potential for growth through IPOs and increased market participation. The downturn in the Tanzanian share index, which lost nearly 32 points over two months, underscores the urgency of implementing reforms that attract foreign direct investment (FDI) and capital inflow. Although the market reforms may take time to yield significant results, DSE can position itself to benefit from increased FDI by diversifying its offerings and attracting international fund managers. By enticing larger, more robust local companies to list on the exchange, DSE can create a compelling growth narrative for investors and enhance market liquidity. Awadh emphasized the importance of convincing prominent local companies to launch IPOs on the DSE, as this would not only attract FDI but also bolster the market's depth and attractiveness to potential investors.