In the first half of 2023, investor mood toward frontier countries like Tanzania was more cautious due to global economic uncertainty, including trade conflicts and geopolitical dangers. Due to this reduction in trading, the local stock market's overall turnover in Tanzania fell from Sh75.05 billion in the first half of 2022 to Sh49 billion in 2023.
According to market information from the Dar es Salaam Stock Exchange (DSE), that reflects a reduction in liquidity of 34.5%.
According to an analysis by the Tanzanian news agency, The Citizen, it was revealed that several overseas investors had changed their investing philosophies and adopted a risk-averse attitude as a result of the continuous volatility in the world financial markets.
The data shows that approximately 58% fewer shares were purchased by foreign investors throughout the study period. Foreign investors purchased shares worth almost Sh49.09 billion between January and June last year, compared to just Sh20.44 billion between January and June 2023.
Analysts believe that a number of variables, such as changes in interest rates from established markets, problems with the availability of dollars, inflation, and trade concerns related to frontier markets like the DSE, have contributed to this downward trend.
The invasion of Ukraine by Russia, the global oil crisis, intermittent Chinese lockdowns, and supply constraints from the pandemic period have all combined to create an explosive cocktail of skyrocketing costs.
Ramadhan Kagwandi, chief executive of the financial business Exodus Advisory, agreed that the slowdown in foreign activity had more to do with global financial changes than it did with local economic performance.
“This year we have seen foreigners offloading investments from the risk markets to more stable and developed markets as they try to balance their portfolio with the global interest rates adjustments,” he said.
The experts claim that the decline in overall sales and foreign purchases should act as a wake-up call for market players and decision-makers. According to their argument, the first-half downturn shows the necessity for aggressive steps to boost market activity, particularly among local retail investors.