• Monetary Policy Rate maintained at 16 percent
• Producer Price Inflation dropped to 8.9 percent in October
• 91-Day T-Bill upped by a basis point.
• Accra Bourse tumbled on account of SCB.
• Cedi depreciated against both the US dollar and Euro.
• Brent crude oil advanced following supply cut measures by OPEC.

Macroeconomic update

Monetary Policy Rate maintained at 16 percent

The Monetary Policy Committee of the Bank of Ghana has maintained the monetary policy rate (MPR) at 16 percent despite improving macroeconomic indicators. Upbeat Composite Index of Economic Activity (CIEA), Business and Consumer confidence indexes, easing inflationary pressures, improving export bases, rebounding of financial sector could, however, not triggered further rate cut. The missed revenue and expenditure targets, fast depreciation of the cedi against major trading currencies, widening public debt stock from 56.8 percent of GDP in September 2018 to 60.3 percent of GDP in September 2019 were some factors posing threats to the economy. The potential spill-over of the global economic uncertainties amidst mixed domestic data however, led to the committee leaving the policy rate unchanged at 16 percent. Presented below is a 1-year trend analysis of the MPR rate from November 2018 to November 2019:

Producer Price Inflation dropped to 8.9 percent in October

Producer Price Inflation (PPI) for October 2019 settled at 8.9 percent down from the 9.1 percent recorded in September 2019. The 0.2 percentage point decline is attributed to lower inflation pressures within the Mining & Quarrying and Manufacturing sub-sectors due to reduced input cost recorded in the sector in the period under review. On the back of this, the PPI for the Mining & Quarrying sub-sector dropped by 2.7 percentage points to 34.4 percent in October. PPI for the Manufacturing sub-sector also recorded 1.0 percentage point decline from the 4.1 percent in September to 3.1 percent in October. The PPI for the Utilities sub-sector, however, increased by 5.9 percentage points to 12.6 percent mainly on account of utility hikes recorded in recent times. Presented below is a 1-year trend analysis of the PPI:

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 the auction, the yield on the 91-Day T-Bill rose marginally by a basis point to settle at 14.70 percent. The yield on the 182-Day and that on the 364-Day T-Bills, however, remained unchanged at their previous week’s rate of 15.14 percent and 17.91 percent respectively. Interest rates on the Government of Ghana treasury notes and bonds also remained unchanged.

Government accepted all the GHS867.56 million bids tendered at the auction. The week’s target of GHS918.00 million was missed with the 91-Day T-Bill dominating Government’s purchase constituting 76.64 percent of the total bids accepted. At the upcoming auction, an amount of GHS663.00 million is earmarked to be raised from the sale of the 91-Day, 182-Day and 364-Day T-Bills respectively.

Illustrated above is the term structure of the Government of Ghana and this sustained its normality even after the rate adjustment recorded at the week’s auction. The normality of the yield curve is expected to be sustained in the near term following the general downtrend in the equity market and persisting uncertainties in the after math of the financial sector clean-up which may compel investors to accept bids at lower rates from Government.

Ghana Stock Exchange

The Accra Bourse posted another round of week-on-week decline spurred by significant selling pressures recorded in some financial sector stocks. Standard Chartered Bank Ltd recorded heavy selling pressures despite a robust 3^rd quarter 2019 financials. Growth of its performance indicators such as profit-after-tax of 15.81 percent and return of equity of 18.27 percent failed to trigger capital appreciation for stockholders. At the close of the day’s trading session, the GSE Composite Index thus dropped by 0.17 percent to settle at 2,147.89 points, representing a year-to-date loss of 16.50 percent. The GSE Financial Stocks Index also fell by 1.43 percent to settle at 1,783.13 points, corresponding to a year-to-date loss of 17.21 percent.

Market outturn improved over the previous week’s records. A total of 11.38 million shares valued at GHS1.49 million exchanged hands,  against the 1.88 million valued at GHS3.69 million as recorded in the previous week’s trade. Intravenous Infusion Ltd and SIC Ltd were the most actively traded stocks, jointly accounting for 93.61 percent of the overall traded volume. Market capitalization, however, fell by 0.07 percent to GHS55,665.92 million.

Stock Price Movements

In all, 11 stocks altered their week opening prices. Total Petroleum Ltd led the bulls with a price uplift of 11 pesewas to trade at GHS2.98 per share. MTN Ghana Ltd and Ecobank Ghana Ltd posted price appreciations of a pesewa each to trade at 71 pesewas and GHS7.81 per share respectively. AngloGold Ashanti Depository Shares also rose by a pesewa to settle at 41 pesewas. 

On the downside, Standard Chartered Bank Ltd significantly trimmed its share price by GHS1.01 to end the week’s trade at GHS13.00 per share. Unilever Ghana Ltd followed with price decline of 30 pesewas to close at GHS16.40 per share. Benso Oil Palm Plantation Ltd dropped by 6 pesewas to settle at GHS2.90 per share. Ghana Oil Company Ltd and SIC Ltd trimmed their share prices by 2 pesewas each to close at GHS1.68 and 8 pesewas per share respectively. CAL Bank Ltd and PZ Cussons Ltd also shed a pesewa each to trade at 81 pesewas and 38 pesewas per share respectively.

Currency Market

Source: Bank of Ghana 22.11.19

The Ghana cedi posted depreciations against the Euro and the British pound but appreciated versus the US dollar. The Euro advanced on the international currency market following improving macroeconomic data from the Eurozone. In the week under review, Eurozone’s largest economy – Germany escaped the technical economic recession benchmark as its 3^rd quarter GDP grew by 0.1 percent to correct previous economic contraction records. In addition, manufacturing data for the Eurozone outstripped the projected target of 46.4 points in November and the previous month’s reading of 45.9 points as it settled at 46.6. These boosted the euro to record 0.27 percent appreciation to trade at GHS5.94 on the interbank currency market. The year-to-date depreciation of the cedi thus rose to 7.16 percent.

The British pound dropped to a week-low on account of political uncertainties and weak economic data emerging from the UK economy. On the economic front, UK’s services and manufacturing sectors went backwards in November to add fresh signs of economic weakness ahead of its upcoming election. Also, a report which indicated that the ruling party was likely to secure a parliamentary majority in the upcoming general election sparked mixed reaction. This followed that a victory for the ruling Conservative Party is expected to expedite  the approval of the Brexit deal to end the three-and-a-half years uncertainty in the UK, but failure could slow the pace of securing a trade deal. The pound thus recorded 0.20 percent depreciation against the cedi to trade at GHS6.91 on the interbank currency market. The year-to-date depreciation of the cedi thus reduced to 10.66 percent.

The US dollar tumbled on account of heightened trade tension between the US and China, amidst cooling labour market data from the US.  The hesitance of  the US Government to agree to the massive tariff rollbacks and US jobless claims which rose to its highest in five months in the week ended 15^th November 2019, clouded the market with uncertainties to affect the greenback. Despite this, the Ghana cedi posted a week-on-week depreciation of 0.31 percent as the selling price of the US dollar rose by 2 pesewas to GHS5.38. The year-to-date depreciation of the cedi thus stood at 10.37 percent.

International Markets

US equity indices posted a week-on-week decline following heightened uncertainties surrounding the on-going trade negotiation between the US and China. In the week under review, the Chinese President – Xi Jinping noted that he will only accept a deal provided the terms of the agreement is of mutual respect and equality and this could slow the progress of the negotiation. The S&P 500 thus ended with a week-on-week decline of 0.33 percent to settle at 3,110.29 points. The Dow Jones Industrial Average also fell by 0.47 percent to settle at an index level of 27,873.61 points.

The London Stock Exchange ended on a positive note as investors took advantage of the soft pound to demand stocks in the week under review. Weak economic data from the UK including services and manufacturing sectors contributed to the weakening of the pound, this on the other hand, buoyed the purchasing power of multinational investors to buy more of stocks. The FTSE 100 thus closed with a week-on-week gain of 0.33 percent to settle at 7,326.81 points.

The Japanese Stock Exchange tumbled on accounts of weak global economic data and uncertainties hindering a peaceful trade negotiation. The continued release of downbeat economic data from China and Eurozone clouded the market with uncertainties reducing the urge to undertake risky investments on the bourse. The Nikkei 255 thus recorded a week-on-week decline of 0.82 percent to settle at 23,112.88 points.

On the African equity market, the Johannesburg All Share Index rebounded by 1.26 percent to close at 56,759.62 points. The Nigerian All Share Index also advanced by 0.52 percent to close at an index level of 26,991.42 points. The Nairobi All Share Index, however, dipped by 0.73 percent to settle at 154.84 points.

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

Brent crude oil rose to a two-month high following OPEC and its allies decision to extend and tighten current output cut arrangements for the upcoming year. Among the decisions to achieve a balance market in the first half of 2020 and subsequently record a supply deficit, was to trim production from Iraq and Nigeria by 300-400,000 barrels per day. Brent crude oil thus added 9 cents to trade at $63.39 per barrel.

Gold recorded a decline after the week’s trading activities on the international commodities market following US Fed’s dovish report which indicated that the Bank was unwilling to cut its interest rate the fourth time for the year. This eroded gain made from the heightened trade dispute between the US and China. Gold thus recorded a week-on-week loss of $4.90 to trade at $1,470.50 per ounce.

Cocoa posted a week-on-week decline after climatic conditions in Ivory Coast improved. This is projected to cause a bumper harvest in the upcoming harvesting season. Cocoa thus lowered its selling price by $143.00 to trade at $2,623.10 per metric tonne.

Coffee rose to a year high following a recent initiative – fund short covering rally – adopted by top growers – Brazil and Vietnam to tighten supply of the soft crop onto the international commodities market. Coffee thus added 8 cents to trade at $1.15 per pound.