TZS-FX INDEXES

A comparison of the movements in the
Tanzanian Shilling against major foreign
currencies namely the US Dollar, the Pound
Sterling and the Euro reveal that the US Dollar
has replaced the other two currencies as the safe
haven for currency hedging in Tanzania.

During the first 2 quarters of the year 2009 the
U.S. Dollar appreciated in value against the local
currency whereas the Pound Sterling and the
Euro depreciated. In the recent days the
Tanzanian Shilling has appreciated against the
greenback and raked in gains to recover some of
its losses. Analysts forecast that the Tanzanian
Shilling will close the year 2009 at around
TZS2,280.00 to TZS3,000.00 and better than it
begun the year.

Although the strength in the local currency
against the world’s trading currency is good for
the local economy in terms of inflation, it is
feared that this may stifle exports to foreign
nations as Tanzanian commodities and goods
become more expensive.

In another comparison, the prices of companies
listed on the Dar es Salaam Stock Exchange as
well as Kenya and Ugandan exchanges show that
prices differ for the same stock in different
markets. The share price of East African Breweries
Limited (EABL) in the Kenya capital market trades
at 8.7% higher at Tanzanian Shilling equivalent of
TZS2,501.25 on Nairobi Stock Exchange compared
to TZS2,300.00 in Tanzania on the DSE. Similarly,
the share price in the Uganda capital market was
8.3% higher at TZS2,491.02 Uganda Shillings
equivalent. However, the share price of Jubilee
Holdings Limited (JHL) and Kenya Airways (KA)
were significantly more expensive in the
Tanzanian capital market than in Kenya and
Uganda. JHL was trading at 66.7% lower in Kenya
and Uganda. Similarly, prices for Kenya Airways
were trading at 74.7% lower in the Kenya and
Uganda capital markets.

Information flow among investors is one of the
reasons that cause the divergence in the share
price of the same stock on different markets.
Therefore, there is lack of information flow in the
Tanzanian market.

Source: Kareem Capital