• Producer Price Inflation hits 8.8 percent.
• Yield on the newly issued 20-year bond at 20.20 percent.
• GSE drove further southwards, weighed by 11 laggards. 
• Ghana cedi deprecated against all 3 major trading currencies.  
• Gold upped but Brent crude oil trimmed its gains as China imposed 10 percent tariff on imported US goods.

Macroeconomic Update

Producer Price Inflation hits 8.8 percent

The producer price inflation stood at 8.8 percent, representing 170 basis points rise from the June rate of 7.6 percent. The uptick was on the back of rising input cost of production across all production sectors of the economy primarily within the mining and quarry sub-sectors. The producer price inflation at the mining and quarry sub-sectors saw 520 basis points rise in July to 27.60 percent from the 22.4 percent recorded in June. The largest production sector – manufacturing sub-sector also increased by 10 basis points to settle at 5.4 percent. In the similar vein, the producer price inflation at the utilities sub-sector upped by 580 basis points to settle at 6.9 percent in July.

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.

At the close of last Friday’s auction, yield on the 91-Day T-Bill eased by 4 basis points to settle at 14.68 percent while that on the 182-Day T-Bill remained unchanged at 15.14 percent. The yield on the 364-Day T-Bill was still quoted at 17.92 percent and interest rate on the other treasury securities remained unchanged. The newly issued 20-year bond saw Government accepting all GHS162.13 million bids tendered at a yield of 20.20 percent from both residence and non-residence investors.

An amount of GHS718.26 million was accepted by the Government of Ghana, after accepting all bids tendered at the auction. The amount raised exceeded the GHS638.00 million target but fell below the amount (GHS823.49 million) raised in the previous trading week. The 91-Day T-Bill continued to dominate Government’s purchase, constituting 85.57 percent of the overall bids raised by the Government.

Illustrated in the figure above is the term structure of the government of Ghana treasury securities. The continued sustenance of the yield curve for close to two-years followed efforts by policy makers to improve the economic outlook of the domestic economy as reflected in the right trending of major economic indicators such as inflation among others. The normality of the yield curve is also expected to be sustained with marginal rate adjustment on treasury yields despite signal by Government to borrow more from the domestic market. This comes on the back of lack of attractiveness of alternative investment vehicles to investors, hence, pricing the expected return on treasury instruments relatively lower in view of been accepted by the Government. 

Ghana Stock Exchange

The GSE drove further southwards as recent revocation of licenses of some 23 finance houses & savings and loan companies added to the prolonged ill sentiments surrounding the financial sector. This has significantly dimmed investors’ expectation that the bullish half-year earnings of some listed stocks could spark a recovery on the Bourse. At the end of the trading week, the GSE Composite Index thus dropped by 1.80 percent to an index level of 2,269.79 points, representing a negative year-to-date return of 11.76 percent. The GSE Financial Stocks Index also nosedived by 2.49 percent to settle at 1,978.62 points, corresponding to a year-to-date loss of 8.13 percent.

A total of 1.85 million shares valued at GHS2.89 million exchanged hands in the weeks trading. This was significantly below the 8.73 million shares worth GHS25.95 million recorded in the previous trading week. Aluworks Ltd was the most actively traded stock, constituting 53.94 percent of the overall traded volume. Market capitalization dwindled by 0.73 percent on account of the general price declines recorded on the bourse to settle at GHS57,058.29 million.

Stock Price Movements

At the pairing of the week’s closing and opening prices, a total of 14 equities recorded price changes. Fan Milk Ltd topped the advancers with 65 pesewas gains to trade at GHS5.50 per share. The Trust Bank (Gambia) Ltd and Aluworks Ltd followed suite with price advancements of 14 pesewas and a pesewa to trade at 36 pesewas and 10 pesewas per share respectively.

Standard Chartered Bank Ltd occupied the bottom of the laggard’s list after trimming 92 pesewas of its opening price to close at GHS18.08 per share. Unilever Ghana Ltd and GCB Bank Ltd had their share prices going down by 59 pesewas and 51 pesewas to trade at GHS17.00 and GHS4.52 per share respectively. Total Petroleum Ltd and Enterprise Group Ltd dropped by 40 pesewas and 20 pesewas to trade at GHS3.00 and GHS1.80 per share respectively. Ecobank Ghana Ltd and Guinness Ghana Breweries Ltd also shed 16 pesewas and 15 pesewas to close at GHS8.34 and GHS1.80 per share respectively. Access Bank (Ghana) Ltd, SAMBA Ltd, The Republic Bank (Ghana) Ltd and Benso Oil Palm Plantation Ltd also recorded price declines after the week’s trading.  

Currency Market

Source: Bank of Ghana 23.08.19

The Ghana cedi recorded another round of week-on-week depreciation against all the three major trading currencies on the interbank currency market. The US dollar steeped up its gains on the international currency market, riding on the recently released consumer inflation data and rising hopes for another round of interest rate cut by the US Feds. The month of July saw an uptick in consumer retail sales data in the world’s largest economy as it rose by 0.7 percentage point against the 0.3 percentage point rise in the previous months. Expectation of another round of policy cut in September 2019 from the US Fed amidst other policy reforms also contributed to gains of the greenback on the international currency market. The dollar thus recorded 0.14 percent week-on-week appreciation as it traded at GHS5.28 against the local currency. The year-to-date depreciation of the cedi thus rose to 8.67 percent.

The British pound closed on a positive note on the international currency market spurred by German Chancellor – Angela Merkel’s indication that a solution to the Irish border was now in place. The hawkish commentary significantly calmed investors uncertainties resulting in the pound’s biggest one-day gain since May 2019. The extent of the gains was however, trimmed last Friday as investors decided to re-assess Boris Johnson’s ability to have a trade policy deal before the October 31^st deadline for the Brexit. The British pound recorded a week-on-week appreciation of 1.02 percent as it traded at GHS6.47 on the interbank currency market. The year-to-date depreciation of the cedi thus rose to 4.54 percent.

The Euro struggled to regain grounds on the international currency market despite the release of stronger-than-expected eurozone services purchasing manager’s index. The IHS Markit purchasing managers’ composite index of the services sector rose to 51.8 points in August to beat both July’s reading of 51.5 points and a forecast of 51.2 points mainly due to resilience of the services sector in both France and Germany. The gains were short-lived as it failed to dispel fears of lacklustre growth within the bloc following continued downturn in export-led factory activity in eurozone’s largest economy – Germany. Despite the Euro’s loss, it posted a week-on-week appreciation of 0.39 percent as it traded at GHS5.88. The year-to-date depreciation of the cedi thus increased to 6.18 percent.

International Markets

The US Stock Market closed in the red on account of heightened trade tension between the US and China in the week under review. The decision by China to impose about 10 percent tariff on imported US goods was met with an announcement by US Government to pull out US Companies operating in China. This decision significantly affected telecommunication sector stocks among which were Apple, Micro Devices and Nvidia which tumbled by about 4.6 percent, 7.4 percent and 5.3 percent respectively. The S&P 500 thus tumbled by 1.44 percent to settle at 2,847.11 points. The Dow Jones Industrial Average similarly fell by 0.99 percent to settle at 25,628.90 points.

The London Stock Exchange posted a week-on-week loss following a turnaround in decision by the US Fed to cut its interest rate significantly in the coming month. The indication to trim interest rate much lower than expected in September by the US Fed negatively affected UK stocks such as Diageo and Unilever which had already factored the massive rate cut in the corporate actions. A rebound of the UK pound following the hawkish commentary by German Chancellor – Angela Merkel also contributed to the negative closure of the Bourse. The FTSE 100 thus dropped by 0.31 percent to settle at an index level of 7,094.98 points.

The Japanese Stock Exchange recorded a positive closure riding on China’s trade war retaliation against the US and upbeat earnings report by stocks within the Paper & Pulp, Railway & Bus and Real Estate sectors. The Nikkei 225 thus rose by 1.43 percent to settle at 20,710.91 points.

On the African equity market, the Johannesburg All Share Index rebounded by 0.23 percent to settle at 53,995.82 points. The Nigerian All Share Index also rose by 3.25 percent to settle at 27,800.17 points. On the flip side, the Nairobi All Share Index recorded 1.01 percent decline to settle at 149.87 points.

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

Brent crude oil recorded a marginal week-on-week gain as the 10 percent tariff imposition on $75 billion worth of imported US goods including crude and autos by the Chinese government in retaliation to Trump’s recent tariff war trimmed reduced the extend of gains associated with the supply cut decision by OPEC. Brent crude thus rose by 70 cents to trade at $59.34 per barrel.

Gold sustained its upward rally as the uncertainties created by China’s reprisal to Trump’s tariff imposition shifted demand towards the safe-haven asset. The yellow metal which became much appealing to investors recorded an uptick in demand leading to $14.00 gains as it traded at $1,537.60 per ounce.

Cocoa was supported by data suggesting dwindling production output ahead of the October-March crop season following the inadequacy of favourable climatic conditions recorded in previous weeks. Cocoa thus rose by $97.00 to trade at $2,208.00 per metric tonne.  

Coffee ended the trading week in the gains lifted by a rebound in the Brazilian real. News of declines in supply of the beans from Vietnam and Brazil onto the international commodities market also contributed to the positive closure of the soft crop. Coffee advanced by 0.34 percent to trade at 93 cents per pound.