• 10-year ESLA Bond oversubscribed.
• GSE whipsawed previous week’s gain as it closed in the red.
• Interest rates on 91-Day and 182-Day T-Bills trimmed after week’s auction.
• Ghana cedi closed the trading week on a brighter note.
• Cocoa recorded gains despite failure by top growers to agree on price flooring measures penetration. 

Macroeconomic Update

10-year ESLA Bond oversubscribed

In the week under review, the Government of Ghana raised a total of GHS1 billion after a successful buy-back arrangement by ESLA Plc in the previous trading week which raised a total of GHS446.453 million worth of bonds from bondholders. The 10-year cedi denominated bond which was issued at an initial price guidance range of 19.50 percent to 19.90 percent was oversubscribed to the tune of GHS1.147 billion but Government only accepted GHS1.00 billion at a coupon rate of 19.85 percent. The proceeds of the bonds are expected to be used to settle portions of the outstanding legacy debt and other obligations due some suppliers and creditors within the energy sector.

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 weekly auction held on the 5^th of July 2019, the interest rates on the short-dated treasury securities eased marginally. The yield on the 91-Day T-Bill dropped by 2 basis points to 14.72 percent whereas that on the 182-Day T-Bill declined by 3 basis points to settle at 15.17 percent. The yield on the 364-Day T-Bill and those on the treasury notes and bonds were unchanged as they were not scheduled for auction. 

Government raised a total of GHS293.94 million in the week under review out after accepting all the tendered bids. The amount raised fell short by GHS746.06 million of the intended targets of GHS1,040.00 million with the 91-Day T-Bill dominating Government’s purchase by 70.40 percent. At the upcoming auction, the Government hopes to raise an amount of GHS726.00 million through the sale of 91-Day, 182-Day and 364-Day T-Bills.

The continued downtrend in yields of Government of Ghana treasury securities is expected to significantly deepen private sector penetration in the domestic economy. This will eventually enhance economic activities to boost revenue collection of the Government. To sustain the downtrend in the yields of Government treasury, it is imperative that policy makers adopts growth stimulating policies and further create necessary business friendly environment to support and build all nascent businesses in the country. 

Ghana Stock Exchange

The Ghana Stocks Exchange whipsawed previous week’s gains as downward pressure by some financial stocks affected the outturn of the market in the week under review. Significant price declines in Ecobank Ghana Ltd and Société Générale Ghana Ltd as well as MTN Ltd dragged the market indices lower. At the closing bell, the GSE Composite Index posted a week-on-week loss of 2.70 percent to settle at 2,330.24 points, representing a year-to-date loss of 9.41 percent. The GSE Financial Stocks Index also recorded a week-on-week decline of 2.47 percent to close at 2,038.32 points corresponding to a negative year-to-date return of 5.36 percent.

Risk taking appeared much lower than observed in the previous trading week due to the significant drop in market turnover. A total of 1.01 million shares valued GHS0.73 million was traded in the week under review, as compared with the 4.76 million and GHS5.26 million recorded in the previous trading week. MTN Ghana Ltd, Ecobank Transnational Incorporated Ltd and Starwin Products Ltd were the most actively traded stocks as they jointly accounted for 68.58 percent of the overall traded volume. Following the bearish closure of the bourse, market capitalization dropped by 0.78 percent to settle at GHS58,274.11 million.

Stock Price Movements

The week’s trading ended with eleven equities recording price changes; four advancers and seven laggards. Standard Chartered Bank Ltd topped the advancers with a price appreciation of 23 pesewas to end the week at GHS19.25 per share. GCB Bank Ltd and Ecobank Transnational Incorporated Ltd had their share prices rising by a pesewa to trade at GHS4.94 and 13 pesewas per share respectively. Starwin Products Ltd also had its share prices upped by a pesewa to settle at 3 pesewas per share.

On the flip side, Ecobank Ghana Ltd went down by 94 pesewas to trade at GHS7.55 per share. Benso Oil Palm Plantation Ltd and Fan Milk Ltd followed suit with price losses of 10 pesewas and 7 pesewas to trade at GHS3.40 and GHS4.93 per share respectively.  CAL Bank Ltd and Société Générale Ghana Ltd went down by 4 pesewas and 3 pesewas to trade at GHS1.00 and 72 pesewas per share respectively. MTN Ghana Ltd and Intravenous Infusion Ltd also trimmed their opening prices by 3 pesewas and a pesewa to end the week at 70 pesewas and 6 pesewas per share respectively.

Currency Market

Source: Bank of Ghana 05.07.19

The Ghana cedi kicked off the new-month on sterling note as it recorded a week-on-week appreciation against both the British pound and the Euro but lost marginally to the US dollar. The US dollar was fragile in the trading week on the international currency market following possibilities of an imminent interest rate cut by the US Federal Reserve. Weak manufacturing data from the US economy as PMI dropped to its lowest in 7-years in the month of June increased investors bet for a rate cut. Also, significant declines in US 10-year bond yields to a 2-and-half year low worsened investors’ fears, negatively affecting the greenback. Despite this, the US dollar gained marginally by 0.01 percent to trade at GHS5.26 on the interbank currency market. The year-to-date depreciation of the cedi thus reduced to 8.36 percent.

The Euro posted its biggest lost in three weeks after the week’s trade on the international currency market following a slide in yields of Government treasury securities in the bloc. Germany’s 10-year bond had its yield trimmed significantly to negative 0.4 percent to ramp up pressure for fresh stimulus policies from the European Central Bank. The depreciation of the single currency also stemmed from disappointing outturn in Eurozone’s manufacturing sector as rippled effects of the trade tariff weighed on activities in the sector. Eurozone’s PMI for the manufacturing sector in June was downwardly reviewed to 47.6 percent from an earlier estimate of 47.7 percent missing the projected 47.8 rise. The Euro thus eased by 8 pesewas to trade at GHS5.90 on the interbank currency market reducing the year-to-date depreciation of the cedi to 6.57 percent.

The British pound continued to dim its outlook on the international currency market as it recorded its ninth consecutive weekly loss against major peers such as the Euro. The depreciation of the pound sterling was sparked by the sharp decline in yields of Government bonds as most advanced economies plan to adopt monetary easing policies to mitigate the impact of low inflation readings and economic downturns. Survey data suggesting a contraction in economic activities for the second quarter amidst the Brexit uncertainties were some factors that sapped demand for the pound. The pound thus lost 10 pesewas to trade at GHS6.58 on the interbank currency market. The year-to-date depreciation of the cedi thus declined to 6.18 percent.

International Markets

US equities closed the week’s trading on a positive note as falling bond yields in the US economy and interest rate cut hints by the US Federal Reserve shifted investors focus onto the equity market. This saw huge demand for banking, telecommunications and communications services sector stocks in the week under review, the extent of the gains was however trimmed after the release of upbeat employment data. The S&P 500 thus posted a week-on-week gain of 1.65 percent to settle at 2,990.41 points. The Dow Jones Industrial Average also recorded a weekly gain of 1.21 percent to settle at 26,922.12 points.

The FTSE 100 ended the trading week bullish as risk taking activities improved following cooling of interest rates on risk-free treasury securities of the UK Government. Additionally, the general softness of the pound sterling boosted demand for UK stocks especially from multinational investors. The FTSE 100 upped by 1.72 percent to end the trading week at an index level of 7,553.14 points.

The Japanese Stock Exchange recorded another round of weekly gains as bullish outturns of Japan’s Government Pension Investment Fund (GPIF) added to positive sentiments that emerged from the recent trade truce between the US and China. Japan’s GPIF which is the largest pension fund in the world overturned a record loss to register a profit of 9.1 trillion yen ($84.4 billion) to boost demand for stocks on the bourse. The Nikkei 225 thus rose by 2.21 percent to close the week at 21,746.38 points.

On the African equity market, the Nairobi All Share Index rose further by 0.13 percent to an index level of 149.80 points. The Johannesburg All Share Index, on the other hand, posted a negative week-on-week performance of 1.05 percent to settle at 57,589.82 points. The Nigerian All Share Index also recorded a weekly loss of 2.32 points to close at 29,270.95 points.

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

Brent crude oil closed trading lower as declining demand for the energy commodities subdued the likely impact of the recent agreed output cut extension by OPEC and its allies. The nine-month extension of the 1.2 million barrels production cut failed to close the blackgold in the gains as data suggesting declining usage of the crude oil in German and China negatively affected the product. Brent crude oil shed $2.32 to trade at $64.23 per barrel.

Gold trimmed its value on the international commodities market spurred by upbeat labour market data in the US economy. A total of 224,000 new jobs were added and unemployment rate still at its lowest in 49 years despite rising from 3.6 percent to 3.7 percent in June offered some relief on interest rate cut. Gold thus dropped by $10.90 to trade at $1,401.60 per ounce.

Cocoa was little changed as mixed sentiment surrounding the recent price floor measures adopted by the two top growers – Ghana and Ivory Coast contributed to its flatness on the international commodities market. The failure of Ghana and Ivory Coast to agree on how to introduce the price floor measure in their export last Wednesday almost left the commodity unchanged. Cocoa posted a gain of $27.50 to trade at $2,464.00 per metric tonne. 

Coffee recorded another round of price appreciation on the international commodities market driven by speculation of production short falls in the coming months. This emanated from the ongoing talks in the world’s top producer and exporter – Brazil about an imminent frost threat to its production. Coffee thus added a cent to trade at $1.11 per pound.