CEO’s QUALTERLY NOTE (Q2, 2015)

CEO’s QUALTERLY NOTE (Q2, 2015)

DSE recorded a decent Q2 performance, albeit with mixed outcomes – total market capitalization and DSE Index recorded a growth of 5 percent, from TZS 22.7 trillion at the close of1st Quarter (Q1) of 2015 to TZS 23.9 trillion as of 30th June 2015 while domestic market capitalization and indices decreased by 3 percent. The domestic market capitalization decreased from TZS 10.2 trillion as of 31st March 2015 to TZS 9.9 trillion as of end of Q2, 2015 – this is a reverse to a similar situation in Q1 of 2015 versus Q4 of 2014.

Notably, our activities were partly affected by the depreciation of shilling compared to US dollar – this had a negative impact on investors’ returns (as measured in US$). As a result, foreign investors’ activities reduced from 91 percent to 86 percent on the buy-side and from 77 percent to 41 percent on the sell-side from previous quarter to this quarter respectively.

On a positive note -- liquidity (turnover) increased from TZS 278 billion Q1, 2015 to TZS 285 billion during this quarter. On annualized basis, our liquidity ratio is now at 9 percent – this liquidity level is more than 5 times in previous history.

Valuations have decreased slightly during the quarter, and valuations matters! -- if we compare our present weighted market valuations versus earlier periods, today, our market valuations on Price/Earning Ratio-basis are slightly cheaper. However, they are still slightly expensive on price/book value and dividend yields. Our market PER, decreased from the trailing weighted average ratio of 17.98 times as of end of March 2015 to trailing PE ratio of 17.31 times during the quarter – a 3 percent decrease. Weighted average Price/book value is now at 4.6 times compared to 4.3 times previous quarter. Similarly, weighted average dividend yield is now at 3.1 percent versus 3.0 percent in earlier period.

As for the bonds market segment – there was a significant decrease in turnover during the quarter: bonds trading turnover was TZS 75 billion (on cost basis) versus TZS 136 billion in the previous quarter.

During Q3, 2015, we expect at least three listings: Mwalimu Commercial Bank, PTA Bank (for corporate bonds) and YETU Microfinance.

Our top priorities during the coming quarter includes: is to introduce mobile and internet trading in our platform, encourage more listings, public education and awareness, integrating and synchronizing our Central Securities Depository (CSD) to that of Bank of Tanzania for government bonds trading. Our demutualization process is now at the advanced stage, we expect IPO and self-listing by end of Q1, 2016. This initiative aims at enhancing our governance structure, provide DSE with efficient financing options for its future growth and also increase DSE’s capability to respond effectively on current and future market needs.