April’s inflation rose to 10.6 percent

Ghana’s inflation jumped to its highest in 26 months, breaking the long-standing single digit as it settled at 10.6 percent in April. The 2.80 percentage point rise is attributed to the unprecedented rise in commodities during the partial lockdown in some cities within the Greater Accra, Ashanti, and Central Regions. On the back of this, inflation at the Food and Non-alcoholic beverages sub-sector significantly rose by 600 basis points from 8.4 percent in March to 14.40 percent in April 2020 following high inflations rates posted by vegetables (37%) and Fruits & Nuts (20.5%) sub-sectors. Inflation at the non-food sector also rose by 30 basis points to settle at 7.70 percent spurred by inflationary pressures within the Housing, Water, Electricity and Gas sub-sectors. Presented below is the trend analysis of the CPI:

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 moderated at the week’s auction. The 91-Day T-Bill had its yield trimmed by 8 basis points as it settled at 13.87 percent. Interest rates on the 182-Day and 364-Day T-Bills, similarly, eased by 2 basis points and 5 basis points to settle at 14.00 percent and 16.70 percent, respectively. Yields on the Government of Ghana treasury notes and bonds were, however, unaltered as they were not part of the week’s issuance.

A total of GHS652.94 million worth of bids were tendered by investors at the week’s auction and the Government accepted all bids. This missed the week’s target of GHS758.00 million and significantly below the GHS1.50 billion worth of bids raised at the previous auction. The 91-Day T-Bill dominated Government’s acceptance as it constituted 81.83 percent of the overall bids raised at the auction. An amount of GHS909.00 million is expected to be raised by the Government at the upcoming auction, scheduled on the 23^rd May 2020.

The term structure of the Government of Ghana securities sustained its normality. This follows continued investor confidence in the domestic economy. We expect the yield curve to sustain its normality despite the heightened uncertainties surrounding the COVID-19 pandemic. This is on the expectation that policy makers will adopt necessary stringent measures to mitigate the negative effects of the pandemic on economic activities.

Ghana Stock Exchange

Trading on the Ghana Stock Exchange closed in the red as ill sentiment surrounding the suspension of dividend payments for 2020 and 2021 by the central bank as measures to mitigate the impact of the COVID-19 pandemic on financial institutions, sparked selling pressure on the bourse. On the back of this, the GSE Financial Stocks Index dropped by 285 basis points to settle at 1,983.83 percent, representing a year-to-date loss of 12.11 percent. The GSE Financial Stocks Index also shed 176 basis points to close at 1,841.15 points, corresponding to a year-to-date loss of 8.84 percent.

A total of 11.75 million shares valued at GHS8.16 million exchanged hands in the week’s trading session. This fell significantly below the 24.26 million shares valued at GHS15.32 million traded at the previous week. The week’s trade was largely driven by MTN Ghana Ltd as it accounted for 97.29 percent of the overall traded shares. Following the general bearishness of the bourse, market capitalization trimmed further by 1.11 percent to settle at GHS 53,987.89 million.

Stock Price Movements

In all, a total of 9 equities altered their share opening prices comprising three advancers and six laggards. GCB Bank Ltd led the bulls run with price appreciation of 12 pesewas to trade at GHS4.50 per share. Total Petroleum Ghana Ltd and Société Générale Ghana Ltd also surged by 10 pesewas and a pesewa to close at GHS2.50 and 65 pesewas per share, respectively.

On the flip side of the mover’s list, Standard Chartered Bank Ghana Ltd tumbled by 50 pesewas to trade at GHS17.50 per share. Ecobank Ghana Ltd and Guinness Ghana Breweries Ltd followed suit with price losses of 45 pesewas and 20 pesewas to settle at GHS7.00 and GHS1.40 per share, respectively. MTN Ghana Ltd and Enterprise Group Ltd also eased by 3 pesewas each to trade at 58 pesewas per share and GHS1.62 per share, respectively. CAL Bank also dipped by a pesewa settle at 77 pesewas per share.

Currency Market

Source: Bank of Ghana 15.05.2020

The Ghana cedi posted mixed performance against the three major trading currencies as it appreciated against the British pound and Euro but depreciated versus the US dollar. The US dollar recorded a modest weekly gain, as the Sino-U.S trade tension and worries, about a second wave of coronavirus infection, sparked the demand for the greenback. Trump’s decision to cut ties with China, following how the pandemic had cast a pall on the US economy, and the subsequent anticipation of a sharp contraction in GDP by 35 percent for the second quarter, dimmed risk taking sentiment. The fear that the reopening of global economies could spark a second wave of infection of the virus, as there currently exists no vaccine, also contributed to dollar’s gain. The US dollar thus posted a weekly gain of 0.17 percent to trade at GHS5.62 on the interbank currency market. The year-to-date depreciation of the cedi thus upped to 1.41 percent.

The British pound lost its shine on the international forex market as the combination of Brexit uncertainties and coronavirus-induced economic slowdown dimmed the appeal of the currency.  UK’s government continued stance to refuse the extension of the Brexit transition period and the unwillingness to compromise in the trade negotiations with the European Union affected market sentiment in the week under review. The coronavirus induced economic slowdown as UK’s economy contracted by 5.8 percent in March and forecasts of its biggest annual decline of about 25 percent in April-June also contributed to the depreciation of the pound sterling. The Pound sterling thus posted a weekly depreciation of 2.40 percent to trade at GHS6.81 on the interbank currency market. The year-to-date appreciation of cedi thus rose to 7.56 percent.

The Euro lost its footing against major rivals following the European Central Bank’s dovish assessment of Eurozone’s economic status. GDP contracted by 3.8 percent in the first quarter of 2020 as economic activities halted on account of the COVID-19 pandemic which took France and Italy (second and third largest economies in the bloc) into recession. Furthermore, the Bank projects a much devastating impact with an economic recession of 15 percent for the second quarter of 2020 and a total recession of between 5 percent and 12 percent by the end of 2020. The Euro thus depreciated by 0.24 percent to trade at GHS6.07. The year-to-date appreciation of the cedi thus rose to 2.32 percent.

International Markets

US stock market closed in the red as the ill-sentiment surrounding the Sino-US trade relations and weaker-than-expected retail and manufacturing data casted a grim picture on the US economy. The S&P 500 thus posted a weekly decline of 2.26 percent to settle at 2,863.70 points. The Dow Jones Industrial Average also recorded a weekly decline of 2.65 percent to settle at 23,685.42 points.

The London Stock Exchange headed southwards as heightened uncertainties on the US-China trade talks and UK’s Brexit affected market sentiment. Trump’s threat to cut down ties with China and the plans by US Commerce Department to block shipments of semiconductors to Huawei amidst the challenges encountered by the UK in securing a favourable trade deal from the bloc affected the market outturn. The FTSE 100 thus recorded a week-on-week loss of 0.26 percent to settle at 5,920.60 points.

The Japanese Stock Exchange posted a weekly loss following emerging reports of an adverse impact of the COVID-19 pandemic on sectors such as Paper & Pulp, Railway & Bus and Real Estate. The Nikkei 225 thus dropped by 0.70 percent after the week’s trade to settle at an index level of 20.037.47 points.

On the African equity market, the Johannesburg All Share Index dropped by 1.01 percent to settle at 50,486.84 points. The Nigerian All Share Index shed 0.72 percent to end the week’s trade at 23,871.33 points. The Nairobi All Share Index also recorded a week-on-week loss of 3.93 percent to settle at 135.33 points.

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

Brent crude oil posted another round of weekly gain on the international commodities market as the reopening of economies buoyed global demand which muted the impact of the recent oversupply. On the back of this, the International Energy Agency projects global crude inventories to trim by 5.5 million barres per day in the second half of this year. The upward drive of the energy commodity was further driven by supply cut decision by OPEC and its allies. Brent crude oil thus added $1.04 to trade at $3.36 per barrel.

Gold recorded a weekly gain as the fears surrounding a potential second wave of virus infections and the trade dispute between the US and China boosted the appeal for the yellow metal among investors. Gold thus added $37.40 to trade at $1,751.30 per ounce.

Cocoa traded lower on the international commodities market despite the inadequate rainfall needed for the April-September mid-crop season in top grower – Ivory Coast. The negative closure of the soft crop followed the potential negative impact of the inadequate rains on the bean size and its quality. Cocoa thus shed $25.50 to trade at $2,392.50 per metric tonne.

Coffee fell on the global commodities market due to concerns of demand destruction following the COVID-19 pandemic and promising outlook of the soft crop in Brazil. Coffee thus shed 2 cents to trade at $1.01 per pound.

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