• Ghana Inflation ticks up to 8.2 percent in November.
• Yields on 91-Day and 364-Day T-Bills rose.
• GSE sustained recovery as market anticipates a turnaround in the upcoming year.
• Cedi lost footing against all the three major trading currencies.
• Global equities market showed signs of recovery after US-China trade talk. 
• Brent crude oil jumped to a 3-month high on easing trade uncertainties.

Macroeconomic Update

Ghana Inflation ticks up to 8.2 percent in November.

Consumer price inflation rose to 8.2 percent in November 2019, representing a 0.5 percentage point rise and the highest rate since the rebasing in August 2019. Continued inflationary pressure from the food segments of the domestic economy ahead of the festive season and the persistent depreciation of the Ghana cedi against major international peers underpinned the inflation hike recorded in the month of November. The Inflation rate for the food and non-alcoholic sub-sector rose to 8.4 percent against the 7.0 percent rate recorded in October. That for the non-food sub-sector, however, dropped marginally by 0.2 percentage points from 8.2 percent in October to 8.0 percent in November. Following the elements of inflationary pressure within the past three months and expectation of demand pressure for food and non-food items in the run-up to the festive season, we expect inflation to further tick up, missing Governments target of 8.0 percent but falling within the Central Bank’s inflation bound of 8.0±2.00 percent. On regional breakdown, inflationary pressure was much higher in the nation’s capital with a rate of 12.8 percent. This was followed by two of its surrounding regions namely; Central region and Volta region with rates of 10.0 percent and 9.5 percent respectively. Inflation was however, at its lowest in the Upper East Region with a rate of 3.5 percent. Presented below is the regional breakdown of CPI in November 2019;

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.

Interest rates on the Government of Ghana treasury securities were adjusted marginally at the week’s auction. The yield on the 91-Day T-Bill surged by a basis point to 14.70 percent. Interest rates on the 364-Day T-Bills also inched up by 7 basis points to settle at 17.90 percent but that on the 182-Day T-Bill remained unchanged at 15.15 percent. Yields on the 2-Year Note, 3-Year and 5-Year Bonds were also unchanged as they were not scheduled for the week’s auction.

Out of the GHS784.49 million bids tendered at the auction; Government accepted a total of GHS780.88 million. This slightly missed the week’s target of GHS826.00 million and the previous week’s value of GHS961.13 million. The 91-Day T-Bill was the most bid accepted by the Government as it constituted83.61 percent. An amount of GHS1,352.00 million is scheduled to be raised at the upcoming auction from the sale of the 91-Day, 182-Day and 364-Day T-Bills.

Despite the rate adjustments recorded on the Government of Ghana treasury securities, the yield curve sustained its normality as indicated in the above diagram. Contributing to the maintenance of the yield curve’s normality is the risk aversion exhibited by investors owing to the banking clean-up exercise carried out by the central bank, boosting investors’ appetite for safe-haven instruments despite elements of economic uncertainties. This has significantly kept yields from rising more than expected despite strong borrowing appetite exhibited by Government on the primary market.

Ghana Stock Exchange

The equity market sustained its recovery after the second’s week trading session of the last month of the year. The consistent rise in the market indices in December is attributed to investors’ expectation of a turnaround in the market activities in the upcoming year as investors try to increase their shareholdings in anticipation of receiving dividend. At the end of the week’s trading session, the GSE Composite Index thus upped by 329 basis points as it settled at an index level of 2,233.17 points, representing a reduced year-to-date loss of 13.18 percent. The GSE Financial Stocks Index, similarly, upticked by 707 basis points to 1,959.04 points, reflecting a year-to-date loss of 9.04 percent.  

Following investors anticipation of a turnaround in market activities, the week’s outturn was an improvement over the previous week’s records. At the closing bell, total shares that exchanged hands stood at 2.62 million valued at GHS1.97 million. This represents 249.33 percent increment over the previous week’s total traded volume. CAL Bank Ltd was the most actively traded stock as it accounted for 66.94 percent of the overall traded volume. Market capitalization also upturned by 1.31 percent to settle at GHS56,544.68 percent.

Stock Price Movements

In all, 8 equities altered their closing prices with 4 advancers and 4 laggards. Leading the bull’s run was Standard Chartered Bank Ltd with price uptick of GHS5.00 to trade at GHS19.00 per share. Access Bank (Ghana) Ltd followed suit with price appreciation of GHS1.87 to trade at GHS4.75 per share. Total Petroleum Ltd and Ghana Oil Company Ltd also posted gains of 45 pesewas and 4 pesewas to trade at GHS3.60 and GHS1.70 per share respectively.

On the flip side, Ecobank Ghana Ltd dropped its share price by 65 pesewas to end the week’s trade at GHS7.25 per share. Fan Milk Ltd and Benso Oil Palm Ltd went down by 41 pesewas and 4 pesewas to trade at GHS4.12 and GHS2.86 per share respectively. Ecobank Transnational Incorporated Ltd also tumbled by a pesewa to trade at 8 pesewas per share.  

Currency Market

Source: Bank of Ghana 13.12.19

The interbank currency market ended with the Ghana cedi losing grounds against all the three major trading currencies. The US dollar dimmed its outlook on the international currency market following the failure of the US Fed to cut its interest rate for the fourth time in 2019 despite signs of improving economic activities. Robust GDP data for the 3^rd quarter, declining number of fillings for unemployment benefit and overall decline in unemployment rate in November failed to trigger a rate cut as highly anticipated by the market, as the central bank considered current inflationary pressures as “very low”. The Fed benchmark overnight lending rate was maintained at 1.50 percent to 1.75 percent for the rest of the year which weighed on the greenback as it dropped to its lowest in four months. Despite the US dollar’s downturn, it recorded a weekly appreciation of 0.03 percent against the cedi as its selling price moved to GHS5.54 on the interbank currency market. The year-to-date depreciation of the cedi thus rose to 14.91 percent.

The British pound posted a sterling performance in the week under review on the international currency market sparked by upbeat sentiment surrounding the recently held general election in the UK. Official results from the election considered with projections as Boris Johnson Party won the majority seat sweeping 368 seats out of the 650 UK parliamentary seats. Following the upbeat sentiment and the expectation for a smooth transition of the Brexit deal the pound was on course for its fastest rate of recovery since the emergence of the Brexit uncertainty in 2016. The British pound thus recorded a week-on-week rise of 1.41 percent with a selling price of GHS7.38 on the interbank currency market. The year-to-date depreciation of the cedi thus widened to 16.37 percent.

The Euro appreciated on the international currency market lifted by improving economic data from the Eurozone. Eurozone’s Investor confidence Index came in much stronger than expected as it rose by 0.7 points in December to outpace both a previous reading of the -5.4 points and projected target of -4.5 percent. Economic sentiment in Germany also improved in December as it rose to its highest in 22 months of 10.7 points against a previous reading of -2.1 points. The euro’s gains were further supported by the European Central Bank decision to keep its policy rate unchanged and signalled that loose monetary policy to tackle inflationary pressures in the economy. The Euro thus appreciated by 0.38 percent to trade at GHS6.17 with the cedi extending its year-to-date depreciation to 10.63 percent.

International Markets

US capital market closed on a positive note supported by positive sentiment surrounding the trade negotiation between the US and China. The successful completion of the 1^st phase of the negotiation marked by the agreement to withdraw some tariff imposition and  scale down certain taxes between these two countries buoyed market sentiment to improve risk taking among investors. At the close of the week’s trading, the S&P 500 index upped by 73 basis points to settle at an index level of 3,168.80 points. The Dow Jones Industrial Average also added 43 basis points to end the week at 28,135.38 points.

The London Stock Exchange recorded its biggest weekly rise since the beginning of the year lifted by Boris Johnson and his Conservative party’s victory in the recently held general election. The anticipation for a smooth Brexit transition with favourable trade deal with the European Union offered significant support to blue-chip stocks within the energy and utility sectors. The FTSE 100 thus upped by 1.57 percent to settle at 7,353.44 points.

The Nikkei 225 jumped to 14-months high after the successful completion of the 1^st phase of the trade negotiation between the US and China. Shares within the electrical sectors were the biggest gainers with Tokyo Electron rising by 4.4 per cent and TDK Corp and Taiyo Yuden also recording sterling performance on the bourse.  The Nikkei 225 thus finished with a week-on-week rise of 2.86 percent to settle at 56,749.12 points.

On the African equity market, the Johannesburg All Share Index posted a weekly rise of 2.61 percent to close at 56,749.12 points. The Nairobi All Share Index also ended with a week-on-week uplift of 0.14 percent to settle at 160.52 points. The Nigerian All Share Index however, recorded a week-on-week decline of 1.19 percent to close at 26,536.21 points.

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

Brent crude oil posted its highest weekly rise in three months on easing global uncertainties. The US-China trade negotiation had its first phase ending successfully in the week under review as the US agreed to suspend some tariffs on selected goods and cut other tariffs imposed on China aimed at fostering closer ties with China. Brent crude oil thus added 83 cents to trade at $65.22 per barrel.

Gold closed the trading week on a positive note despite the last-minute redress of the prolonged trade dispute between the US and China which saw demand drift from the safe haven commodity. The successful completion of the phase one of the trade negotiation dimmed demand for the yellow metal as it buoyed risk taking among investors. This was, however, unable to fully erode gains arising from the dovish monetary decision by the US Fed as it left its interest rate unchanged with signals of maintaining rate in 2020. Gold thus made a week-on-week rise of $16.10 as it closed the trading week at $1,481.20 per ounce.

Cocoa shed value on the international commodities market after the week’s trading activities. This came on the back of plans by local farmers in Ivory Coast to step up their production to shore-up their revenues following the perceived lack of business alternatives outside the cocoa industry. This initiative affected the pricing of cocoa on the international commodities market as it poses a threat to the recent policy adopted by Ivory Coast and Ghana to cap output to improve the value of the soft crop. Cocoa thus dropped by $45.00 to trade at $2,570.00 per metric tonne. 

Coffee recorded its biggest week-on-week rise in two years on the international commodities market following fund buying and fresh signs of supply tightness in top growers. Persisting dry weather conditions in Brazil is tipped to contribute to global deficit in the 2020/21 crop season hence lifting the value of the soft crop. Coffee upped by 6 cents to trade at $1.30 per pound.

Note: The data in this publication is Friday on Friday (w/w)