finance & economy

Issues on financial market highly focused on government bonds increase private sector crowding out effect in 2020 (BCT)

January 24, 2022

(TAP)- Amid a fragile economic situation characterised by a growing budget deficit in 2020, issues on the financial market were highly focused on government securities, thereby increasing the crowding out of the private sector, reads the ' 2020 Annual Report on Banking Supervision, ' released by the Central Bank of Tunisia Friday.

Indeed, issues of Treasury bonds grew significantly to 8,279 MD, against 1,132 MD in 2019 with a concentration on short-term Treasury bill auctions which monopolised 71% of the above-mentioned issues in 2020, compared to 39% in 2019.

Corporate issues through public offering went down to 620 MD in 2020, against 683 MD in 2019. These issues were concentrated on debt securities which grew significantly compared to the previous year, by totalling 414 MD, i.e. 67% of the global volume of issues, against 221 MD and 32.4%, respectively, in 2019.

As for issues through public offering of capital securities, they totalled 206 MD. They involved the capital increase of the company 'Carthage Cement', against 462 MD in 2019.

The Tunindex index fell sharply during the first quarter of 2020 reaching its lowest level on March 17, 2020. The index then followed an upward trend to close the year at 6884.93 points, allowing it to limit its losses to 3.3%.

Regarding sector indices, the annual results for 2020 were rather mixed.

Out of the 13 sector indices, nine achieved a positive performance varying between 2.1% and 38.8%.

The index of financial companies decreased by 16.1% in 2020 following the decline of the Tunbank index by 18.5% while the indices of the insurance and financial services sector went up 9.1% and 6.8%, respectively.

Based on the financial statements released by 64 listed companies, it appears that the total net result fell by 31.2% in the first half of 2020. This is mainly due to the COVID-19 pandemic which has impacted economic activity.

Concurrently, the volume of transactions on the secondary market was not greatly affected by the health crisis; the volume of trade on the stock market slightly decreased. It decreased from 1,590 MD in 2019 to 1,564 MD in 2020 with the average daily volume of trading stabilising at the same level recorded in 2019, i.e. 6.3 MD.

Market capitalisation fell by 2.7% to 23,092 MD in 2020, i.e. 19.7% of GDP against 23,724 MD or 19.3% of GDP in 2019. Financial companies still dominate market capitalisation with a share of 42.1%.

Even if transactions by foreigners generated a net seller flow of 86 MD in 2020 on the Stock Exchange, their share in market capitalisation improved slightly to 25.3% in 2020 from 24.8% in 2019, reflecting essentially the strategic and stable vocation of foreign share-holding; only a small part of the capitalisation of foreigners being floating and volatile.

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