Tanzania market watch

Tanzania's financial markets have experienced a notable shift, with increasing activity in government bonds despite global interest rate hikes. Mecklaud Edson, Chief Internal Auditor at the Dar Es Salaam Stock Exchange, recently shared his insights on the market dynamics with CNBC Africa. Edson highlighted the internal control mechanisms in place to monitor and address the changes occurring within the market. He emphasized the drop in foreign participation in the equities market but noted that it had not significantly impacted the market turnover. The exchange employs market surveillance tools, collaborates with brokers, and closely monitors the behavior of foreign investors to understand the drivers behind their reduced presence. Factors such as geopolitical views, exchange rates, and market behaviors have influenced the shift in investor sentiment, with many foreign investors moving towards stronger economy markets. In response, the exchange has introduced incentives for local citizens and companies to mitigate the impact of the foreign investors' departure. Despite the decline in foreign participation, the market turnover has shown improvement compared to the previous year. Moreover, Edson discussed the transparent trading framework governing bonds in the market. The exchange has implemented an automated trading system that allows market players to post orders, ensuring transparency for all participants. Additionally, a Requested For Proposal (RFP) model has been introduced to enhance accountability and attract more investors to the bond segment. The prices of bonds are determined by the forces of demand and supply, with management actively addressing any exceptions that arise. While discussing the depreciation of the Tanzanian shilling, Edson highlighted concerns about its impact on investor confidence and foreign portfolio inflows. The exchange conducts regular reconciliations of exposures, stress testing, and risk analysis to mitigate potential risks associated with currency fluctuations. Collaborating with the government, efforts are being made to attract foreign investors and boost local participation in the market. Hedging policies are also being enforced to ensure compliance with regulatory frameworks regarding currency appreciation and depreciation. Overall, Edson's insights shed light on the proactive measures being taken to navigate the evolving landscape of Tanzania's financial markets.