• Government revised macroeconomic indicators for 2019 but needs GHS6.3 billion extra.
• Yield on the 91-Day T-Bill upped by a basis point.
• GSE closed bearish amidst positive 2^nd quarter earnings.
• Ghana cedi sustained recovery against the British pound and Euro.
• Gold surged on rekindled trade dispute. 

Government revised macroeconomic indicators for 2019 but needs GHS6.3 billion extra.

In the recent presentation of the mid-year review by the Minister of Finance – Ken Ofori Attah, Government revised major macroeconomic indicators for the 2019 financial year. Threat of continued depreciation of the local currency to major trading partners, lower-than-programmed Total Revenue and Grants, rising government expenditure, and challenges within the energy sector necessitated the revision of major economic indicators.

GDP is now anticipated to grow by 7.1 percent against an earlier forecast of 7.6 percent for 2019. Expenditure overrun is forecast hence leading to an upward review of fiscal deficit from 4.2 percent of GDP to 4.5 percent of GDP by Government. Total revenue and grants for 2019 is however, downwardly reviewed by 0.01 percentage point from an original estimate of GHS58,904.90 million to GHS58,896.50 million, arising from an expectation of a short fall in revenue generation from the oil sector.

On the contrary, Government expenditure for 2019 is now expected to soar by 1.6 percent to GHS74,11.7 million than earlier communicated. This is to service interest payments and rising new expenses at the energy and security sectors of the economy. On the back of this, Government has outlined new tax measures including an upward review of the energy sector levies from 17 percent to 21 percent and upped the communication service tax to 9 percent from a previous rate of 6 percent. In addition, Government seeks to raise GHS6.37 billion to supplement the original appropriation of GHS78.77 billion to cater for its expenditures.

Source: BOG; MOFEP; GSS.     * represents provisional estimate

Government of Ghana Treasury Securities

NB: The above are the annual yields on Government of Ghana Treasury Securities.

The week’s auction saw the yield on the 91-Day T-Bill rising by a basis point to 14.73 percent. The yields on the 182-Day and 364-Day T-Bills, however, remained unchanged at 15.17 percent and 17.90 percent respectively. Interest rates on the treasury notes and bonds also remained unchanged at their respective rates.

At the auction, Government raised GHS417.06 million after accepting all bids tendered but fell below the week’s target of GHS699.00 million. The 91-Day T-Bill dominated the purchase, constituting 74.52 percent of the overall bids accepted by the Government. The upcoming auction is expected to raise an amount of GHS627.00 million from the issuance of the 91-Day, 182-Day and 364-Day T-Bills. 

The continued normality of the yield curve reflects investors’ confidence in the domestic economy. The Bank of Ghana Composite Index of Economy Activity which jumped from 2.4 points in December 2018 to 3.2 in May 2019 encapsulate the fact that despite volatility of the local currency against major peers, the economy continues to perform well with consistent decline in headline inflation. Despite the signal by Government to borrow more to finance its projects, we do not anticipate major rise in yields following the relative unattractiveness of the capital market.

Ghana Stock Exchange

Trading on the Accra Bourse closed bearish despite some positive earnings report by some listed stocks on the Bourse. At the closing bell, the GSE Composite Index posted a week-on-week decline of 0.11 percent to settle at 2,332.77 points, representing a year-to-date loss of 9.31 percent. The GSE Financial Stocks Index also recorded a week-on-week decline of 0.17 percent to settle at an index point of 2,064.77 points, corresponding to a negative year-to-date return of 4.13 percent.

A total of 691,050 million shares valued at GHS1.84 million exchanged hands in the week under review. This represents 52.99 percent declines from the previous week’s total traded volume. MTN Ghana Ltd was the most actively traded stocks as it accounted for 28.05 percent of the overall traded volume. Market capitalization also dropped by 0.39 percent to settle at GHS57,896.40 million.

Stock Price Movements

A total of nine equities changed prices after the week’s trading activities. Fan Milk Ltd led the bulls with 18 pesewas gains to trade at GHS4.73 per share. GCB Bank Ltd upped its share prices by 8 pesewas to close the trading week at GHS5.03 per share. The Trust Bank (Gambia) Ltd and Ecobank Ghana Ltd gained 2 pesewas and a pesewa to trade at 14 pesewas and GHS8.51 per share respectively.

On the flip side, Benso Oil Palm Plantation Ltd occupied the bottom of the laggards list after trimming 10 pesewas of its week’s opening price to close at GHS3.10 per share. Unilever Ghana Ltd and Ghana Oil Company Ltd had their share prices easing by 6 pesewas and 5 pesewas to trade at GHS17.59 and GHS2.00 per share respectively. Société Générale Ghana Ltd and Ecobank Transnational Incorporated also shed a pesewa each to trade at 72 pesewas and 11 pesewas per share respectively.

Currency Market

Source: Bank of Ghana 02.08.19

The Ghana cedi sustained its shine against the British pound and the Euro but tumbled versus the US dollar. The US dollar grew stronger on the international currency market after decision by the US Fed to cut interest rate for the first time since the financial crisis in 2008. As widely expected, key benchmark interest rate in the US was cut by a quarter of a percentage point, to a range of 2 percent to 2.25 percent in response to the growing risk of higher import tariffs and a slowdown in the world’s major economies. This buoyed investors’ confidence to subdue projection of easing economic activities in the second quarter to 1.8 percent, from 3.1 percent in 1^st quarter. The US dollar thus appreciated by 0.06 percent to trade at GHS5.26 on the interbank currency market. The year-to-date depreciation of the cedi thus rose to 8.33 percent.

The British pound headed towards its lowest in 30 months against major peers on the international currency market. This was on account of a parliamentary re-election in the UK which saw a shrinking majority against Boris Johnson party dimming the chances to push his agenda in the house of senate as well as having a favorable deal trade policy with the bloc. The depreciation of the pound was also sparked by failure of the Bank of England to cut interest rates as anticipated while trimming growth forecast for 2019 to 1.3 percent from a previous rate of 1.5 percent. The pound thus recorded a week-on-week depreciation of 2.14 percent to trade at GHS6.38 on the interbank currency market. The year-to-date depreciation of the cedi thus narrowed to 3.16 percent.

The Euro recorded another round of weekly depreciation on the international forex market as the recently held monetary policy review by the European Central Bank took center stage in the week’s trading activities. The failure to cut interest rate but adopting other stimulus measures such as the implementation of a new asset buying programs aimed at of addressing its economic challenges were not appreciated by market actors, hence, affecting the single currency. Eurozone’s inflation data came in much lower-than-expected as it settled at 1.1 percent in July from a previous rate of 1.3 percent to also dim the outlook of the Euro. The Euro thus posted a week-on-week depreciation of 0.13 percent as it traded at GHS5.84 on the interbank currency market. The year-to-date depreciation of the cedi thus reduced to 5.84 percent.

International Markets

The US equity market recorded its worst week-on-week decline since the beginning of 2019 as trade jitters amidst lack of commitment by the US Fed to pursue further interest rate cut sparked huge sell-off on the bourse. The 10 percent extra tariff imposition on imported Chinese goods dumped investors’ sentiment to affect the listed stocks. At the closing bell, The S&P 500 thus shed 3.10 percent to settle at an index level of 2,932.05 points. The Dow Jones Industrial Average similarly nosedived by 2.60 percent to close at 26,485.01 points.

The London Stocks Exchange tumbled weighed by the market uncertainties associated with the newly tariff imposition by the US government on Chinese goods. Furthermore, political uncertainties and the increasing risks of not having a trade deal policy with the European Union affected market activities on the bourse. The FTSE 100 drove down by 1.88 percent to settle at 7,407.06 points.

The Japanese Stock Exchange headed southward as the new tax imposition dimmed risk taking sentiment on the bourse. The 10 percent new tariff brings total imposition to 35 percent on $250.00 billion worth of Chinese goods and this heavily affected Paper & Pulp, Railway & Bus and Real Estate sectors. The Nikkei 225 thus recorded a week-on-week decline of 2.64 percent to settle at 21,087.16 points.

On the African equity market, the Johannesburg All Share Index fell by 2.25 percent to settle at 56,273.92 points. The Nigerian All Share Index dipped by 1.03 percent to settle at 27,630.46 points. The Nairobi All Share Index also declined by 0.45 percent to an index level of 148.33 points.

Source:www.bloomberg.com, & www.investing.com

Brent crude oil dropped after the week’s trading activities mainly on account of a rekindled trade dispute between the US and China which is projected to deepen weak global economic outturns. Data from the US economy suggested significant declines in its manufacturing and construction sectors as these recorded their lowest in nearly 3-years and 1-and-half years respectively in June 2019 mainly on the back of the US-China disputes. Brent crude oil thus shed $1.57 to trade at $61.89 per barrel.

Gold upped its value as it benefitted from the rekindled trade tariff war between the US and the Chinese Governments. The announcement by Trump to impose an extra 10 percent tariff on the remaining $300 billion of imported Chinese goods and products, effective September 1^st dimmed investors’ risk-taking sentiment for safe-haven assets. Gold thus added $25.30 to trade at $1,457.50 per ounce.

Cocoa recorded some losses on the international commodities market due to improving production outlook stemming from favourable climatic conditions in top grower – Ivory Coast. Above-average rainfall in recent times in Ivory coast amidst adequate sunshine made buyers to price the beans much lower ahead of the October-to-March crop season. Cocoa thus lost $69.00 to trade at $2,320.00 per metric tonne. 

Coffee dropped to a six-weeks low on the international commodities market resulting from significant depreciation of the Brazilian real in the week under review amidst projection rise concerns in both Brazil and Vietnam. Coffee thus tumbled by 2 cents to trade at 98 cents per pound.