FORM FIVE COMMERCE – STOCK EXCHANGE

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DAR ES SALAAM STOCK EXCHANGE (D.S.E)

• Historical background
  

 

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Is the financial market incorporated in 1996 and became operational in 1998. Its functions are the same as other stock exchange markets. It is located in twiga building, 4^th floor, opened five days in a week from 10:00 am to 6:00 pm at samora avenue in Dar es salaam.

What are the securities traded in Dar es salaam

1. Ordinary shares
   
2. Bonds
   
3. Government securities
   

 

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• Questions pertaining stock exchange
  

 

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1. Outline qualifications needed to be a member of stock exchange
   
2. Identify procedures of joining stock exchange market
   

 

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LISTED COMPANIES IN DSE

Listed companies are the companies which operate and decide to sell their securities in DSE. Currently there are 14 listed companies which are as follows

• CRDB bank
  
• Precision airways\Swiss port
  
• Twiga cement
  
• TAHACO
  
• TOL
  
• Common securities traded in DSE
  

 

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1. Ordinary shares
   
2. Bonds
   
3. Government securities
   

 

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DSE MEMBERSHIP

The membership in DSE consist of

1. Licensed dealing membership LDM
   
2. Associate membership AM
   

 

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WHO ARE?

1. LDM.   Are members who are allowed to access the trading flow especially buying and selling e.g. listed companies
   
2. AM.     Are institutions and companies which support the DSE e.g. banks, brokers and jobbers
   

 

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TRADING SYSTEM IN DAR ES SALAAM STOCK EXCHANGE

Trading is conducted in the DSE trading flow order special device called ATS (Automated Trading System).

This is an electronic system which matches bids vs officers using an electronic matching engine.

FUNCTIONS OF DAR ES SALAAM STOCK EXCHANGE

1. To provide a market for buying and selling securities.
   
2. To set price for every security either bought or sold to investors.
   
3. To provide opportunities for more investments and savings as part of economic growth of the country.
   
4. To provide useful information and statistics for various companies especially prospective investors.
   
5. To prepare stock exchange index which is very essential in checking countries economic progress.
   
6. To provide advice in effective investment opportunities.
   
7. To ensure that the safety of investors is guaranteed.
   

 

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ECONOMIC BENEFITS OF STOCK EXCHANGE

• What are they?
  

 

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1. It enables industries and companies to mobilize savings more cheaply than otherwise.
   
2. It enables to save some fluctuations in prices of commodities.
   
3. It provides employment opportunities.
   
4. It helps to channel funds to investment in economic sectors where earnings are high.
   
5. It ennglish-swahili/courage” target=”_blank”>courages companies and business with low performance to perform well.
   
6. It helps to mobilize foreign exchange when securities are sold in other countries.
   
7. It increases interdependency between the private sectors and public sectors through this market.
   
8. It enables securities to be easily turned into liquid assets of companies, financial institutions and government.
   

 

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What factors which influence the price of securities in stock exchange market?

• Demand and supply of shares and stocks. These forces of demand and supply of the issued shares, securities and stocks can influence the price of share either to rise or fall at a particular period of time. So when the share, securities and stocks are more demanded this will lead to the rise of price compared to when they are not much needed.
  
• Bank rate.   Also the bank rate or interest rate affects much the price of stock exchange whereby when there is high bank rate this means most of people will be disnglish-swahili/courage” target=”_blank”>couraged to lend money from banks so the supply of money in the society will decrease hence the price of stock exchange also will fall unlike when there is low bank rates the price of stock exchange will rise and investors will be ennglish-swahili/courage” target=”_blank”>couraged to lend more money from banks and other financial institutions.
  
• Political situations.   The political situation of a country also determines the price of stock exchange, when the country is facing conflicts and wars, there is absence of political freedom. Most of its citizens are refugees, they migrate from one place to another then the price of stock exchange will be low because people will not concentrate on investing or purchasing shares.
  

 

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MEMBERSHIP OF THE STOCK EXCHANGE
The conditions of becoming a member of the stock exchange are:
1. The candidate must obtain a nomination from a retiring member before applying for admission. However, before one is nominated, he has to pay a nomination fee.
2. Applicant must be over 18 years of age.
3. Applicant must provide referees in the form of a proposer and a seconder who are not under any financial obligation in the case of candidate default.
4. Should never have been declared bankrupt or if you have, have been discharged of the debt.

GENERAL PROCEDURES FOR PURCHASING SECURITIES
1. Deciding on objective. Invest must decide on his/her objectives in relation to buying the shares.
2. Contacting stock broker. After the making a decision, the intending investor has to contact the stockbroker with whom he/she discusses matter concerning the investment. The buying broker who must have information regarding market trends.
3. Price quotation. The buying broker contacts the jobber who quotes the price for the shaves. The jobber quotes two prices to the broker.
4. The bargaining day. The broker organizes and meets the jobber to bargain over the prices. After agreeing, the broker sends a contract note to the client (investor).
5. After agreeing on the price, the broker contacts the jobber on his /her client behalf.
6. The buying broker completes a stock transfer form and has it signed by the seller for whom she/he is acting.

WHY INVEST IN SECURITIES?
Share holders enjoy many advantages that come with owning securities. These include,
1. Dividends. When companies make profits, the board of directors usually gives a percentage of profit to its shareholders in the form of dividend.
2. For investment purposes and they are mainly interested in making profits.
3. Some people buy shares and stocks as a means of saving because they are easily marketable.
4. Shares give the shares holders the right to attend and vote on important company policies during annual general meetings.
5. Shares may be accepted as collateral security against loans from financial institution.
6. Capital growth. If the company is growing, the value of share will also grow.

DISADVANTAGES OF INVESTING IN SHARES
1. Share prices go up and down depending on a number of different factors like demand and supply etc.
2. If the company’s profit falls, the dividend also falls. And if it makes losses, the company may not be able to pay divided.
3. If share prices fall, their asset value is lessened and if the company collapses, the shares become worthless.
4. If the company goes into liquidation, the share holder are the lost to be paid after all other creditors.

RIGHTS OF SHAREHOLDERS
Shareholders have the following rights:
1. The right to amend the memorandum of Association.
2. The right to sell shares.
3. The right to vote at general meetings.
4. The right to approve or disapprove the sale or purchase of company assets.
5. The right to approve payment of dividends, issue of bonus shaves, rights issues and increase in the share capital.