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Tanzania: Analysts forecast over-subscription of 5-year bond
Analysts are projecting that a five-year treasury bond to be oversubscribed but with no significant change in yield rate. Raphael Masumbuko, CEO of Zan Securities joins CNBC Africa for more.
Tue, 22 Jun 2021 10:04:10 GMT
Disclaimer: The following content is generated automatically by a GPT AI and may not be accurate. To verify the details, please watch the video
AI Generated Summary
- Government projects funded by market capital include media, infrastructure, and long-term initiatives like roads.
- Local investors show strong interest in the bond offering despite the 9.3% yield rate over five years.
- Market movements on the Dar es Salaam Stock Exchange reflect external influences and company-specific performance.
- The Tanzanian financial landscape demonstrates a balance between optimism and caution amidst global economic uncertainties.
Tanzania is currently seeing projections that a five-year treasury bond issued by the government will be oversubscribed, maintaining a steady yield rate. Raphael Masumbuko, the CEO of Zan Securities, shed light on this development during an interview with CNBC Africa. Masumbuko explained that the government initiative to raise funds from the market aims to finance various projects, including media, infrastructure, and long-term endeavors. These funds will be channeled towards retiring existing debts, funding maturing bonds, and supporting crucial government projects like infrastructure development such as roads.
Despite concerns about potential debt distress for Tanzania in the future, Masumbuko reassured that the government is actively managing its debt while also focusing on increasing revenue collection internally. He emphasized the importance of balancing debt obligations with revenue generation to maintain financial stability and sustainability.
The recent oversubscription of a euro bond issued by Kenya, which resulted in $5.4 billion in excess funds, has set a precedent for investors in the East African region. Analysts are anticipating a similar trend with the Tanzanian government's bond offering, potentially leading to an oversubscription. Masumbuko highlighted the historical trend of oversubscribed government bonds in Tanzania, suggesting a positive outlook for the current bond issuance.
When discussing the investor profile for the bond, Masumbuko noted that local investors predominantly show interest in the offering. Despite the 9.3% yield rate over five years, local investors are actively participating, showcasing confidence in the bond's potential returns. The high subscription levels indicate strong investor confidence, even compared to longer-term bonds ranging from 10 to 25 years.
Shifting the focus to the Dar es Salaam Stock Exchange (DSE), Masumbuko addressed recent market movements, particularly on the East African Breweries Limited (EABL) counter. While the EABL counter experienced significant losses, Masumbuko attributed the volatility to external factors, including movements in the European stock exchange. He emphasized that short-term fluctuations in stock prices are normal and should not significantly impact the overall market.
Regarding the recent drop in the all share index at the DSE, Masumbuko downplayed its potential impact, citing the dominance of high-capitalization stocks on the index. He highlighted the modest improvements in the stock index, indicating a positive shift in market sentiment. The Tanzanian All Share Index (TSI) reflected this positive trend, showing signs of improvement.
Several companies contributed to the fluctuations in the TSI, with notable changes in stock prices observed for companies like CERB, TSI, TRG, Newcoss, and DSE PLC. These movements underscore the dynamic nature of the stock market and the influence of individual company performances on broader market indices.
Overall, Tanzania's financial landscape presents a mix of optimism and cautious optimism, as investors navigate market fluctuations and government bond offerings. The projected oversubscription of the five-year treasury bond offers a glimpse into investor confidence in Tanzania's economic prospects, despite global uncertainties.
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