• BOG to Pump $1 billion dollars into the reserves.
• Yield on 182-Day T-bill dipped by a basis point.
• The equity market drifted further southwards.
• The Ghana cedi depreciated against all the three major currencies.
• Gold, Cocoa and Coffee advanced but Brent Crude Oil tumbled.

Macroeconomic Update

BOG to pump 1 billion dollars into reserves to curb Cedi depreciation

The Bank of Ghana is set to inject $1 billion into the economy through inflows from the cocoa syndicated loan bringing the gross international reserves to $9 billion. This is geared towards tackling downside risk from both the external and domestic sectors thereby reviving investors’ confidence in the economy, and further helping to curb the free fall of the Ghana Cedi. The Ghana Cedi has worsened its depreciation against major trading currencies, recording as high as 9.69 percent depreciation against the US dollar at the end of October 2019.

Ghana’s dependence on international finance, technical assistance and imported goods needs a review as it continues to weigh on the local currency. Conscious efforts to add value to our exports, as well as domestic production of some of the heavily imported goods; rice, cotton fabric, non-crude oil, worn clothes etc., would shore up the Cedi through international trade transactions other than the supply boost initiatives, usually  adopted by the central bank. A long-term approach to the Cedi’s depreciation is therefore a paradigm shift from an import dependent economy to an export dependent one.

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 week’s auction, the interest rates on the 182-Day T-Bill dipped by a basis point to settle at 15.13 percent. Yields on the 91-Day T-Bill and 364-Day T-Bill on the other hand, remained unchanged at 14.69 and 17.90 percent respectively. Yields on other treasury notes and bonds however, remained the same as they were not scheduled for the week’s auction.

At the auction, Government accepted all the GHS 518.27 million bids tendered by investors. The accepted amount exceeded the week’s target of GHS491.00 million. The 91-Day T-Bill continued to dominate Government’s purchase as it constituted 77.60 percent of the total bids accepted by the Government. A total amount of GHS 700 million is expected to be raised in the upcoming auction through the sale of short-term treasury instruments.

Despite the rate adjustment recorded at the auction, the yield curve sustained its normality. This is attributed to the relative attractiveness of the money market against other markets as well as Government’s appetite for borrowing. It behoves on Government to adopt prudent monetary policies to ensure stability in macroeconomic indicators that will improve investor sentiment to spur economic growth.

Ghana Stock Exchange

The Ghana Stock Exchange drifted further southwards as persistent bearish sentiments among investors sparked intense selling pressure on the bourse. The GSE Composite Index thus declined by 0.27 percent to settle at an index level of 2,149.70 points, representing a year-to-date loss of 16.43 percent. The GSE Financial Stocks Index also slipped by 0.59 percent to end the trading week at an index level of 1,806.73 points, corresponding to a year-to-date loss of 16.11 percent.

Market activity improved over the previous week’s outturn with investors taking positions as listed firms release their third quarter earnings results. A total turnover of 8.83 million shares valued at GHS7.15 million exchanged hands in the week under review. This corresponded to 3.03 percent rise over last week’s traded volume of 8.57 million shares. Market capitalization however, dipped by 0.11 percent to settle at GHS55,519.07 million.

Stock Price Movements

At the pairing of the week’s opening and closing prices, a total of seven equities posted price changes comprising three advancers and four laggards. CAL Bank Ltd emerged as the best performing stock gaining 5 pesewas to trade at 80 pesewas per share. Enterprise Group Ltd and Société Générale Ghana Ltd upped by 2 pesewas each to trade at GHS1.65 and 60 pesewas per share, respectively.

On the flip side, Standard Chartered Bank Ghana Ltd led the pack of losers trimming GHS1.00 to close at GHS15.00 per share. Total Petroleum Ghana Ltd and Ghana Oil Company Ltd keenly followed losing 5 pesewas each to trade at GHS 2.82 and GHS1.70 per share respectively. GCB Bank Ltd also dipped by 2 pesewas to settle at GHS4.86 pesewas per share.  

Currency Market

Source: Bank of Ghana 01.11.19

The interbank forex market closed with the Ghana Cedi depreciating against all the three major trading currencies. The US Dollar slipped on the international currency market as a reduction in borrowing rates and weak manufacturing data sparked fears of economic recession. In the month of October 2019, US Purchasing Index for the manufacturing sector failed to rebound, contracting for the third consecutive time as it settled at 48.3 percent below the projected rise of 49.1 percent. The greenback was also weighed by Fed’s decision to cut US borrowing rate by 0.25 percent to tackle concerns of slowing global growth.  Despite the dollar’s weakness, it   recorded a week-on-week gain of 0.09 percent to sell at GHS 5.34 on the interbank currency market. The year-to-date depreciation of the cedi thus rose to 9.69 percent.

The British pound hovered near a month high on easing fears of Britain leaving the European Union without a favourable trade deal. Investors trimmed their bearish bets on a no-deal Brexit following the EU’s decision to ratify Britain’s request for a three-month extension. This is to provide adequate time to negotiate for a favourable trade deal. Following the Pound’s gains, it appreciated by 1.02 percent to sell at GHS6.92 on the interbank currency market. The year-to-date depreciation of the cedi thus widened to 10.75 percent. 

The Euro advanced against its major peers, buoyed by upbeat economic data and a weaker dollar. The Eurozone’s core inflation recorded a 0.1 percentage rise to settle at 1.1 percent in October from 1.0 percent in the previous month and unemployment data in the bloc also came in as expected at 7.5 percent to revive investors’ sentiments in the economy. The single currency also benefited from the US Dollar’s woes as investors shifted their demand towards the euro on account of downbeat data from the US. The Euro thus recorded a week-on-week gain of 0.82 percent to trade at GHS5.96 on the interbank currency market. The year-to-date depreciation of the cedi thus rose to 7.53 percent.

International Markets

The US equity market ended bullish as better-than-expected labour market statistics buoyed the demand for stocks in the week under review. The release of data by the US labour Department which showed about 128,000 jobs addition help lowered the unemployment rate in the world’s largest economy to 3.6 percent. Stocks within the Oil & Gas, Industrials and Basic Materials recorded the most gains in the week under review. At the close of the trade, the S&P 500 posted a week-on-week gain of 1.47 percent to settle at an index level of 3,066.91 points. The Dow Jones Industrial Average also ended with a week-on-week gain of 1.44 percent to close at 27,347.36 points.

Trading on the London Stocks Exchange ended on a positive note, driven by commodities stocks on the bourse. The report of an expectation beating performance in China’s manufacturing firms and US’ Labour market stimulated an unprecedent gains in some producer companies on the London Stock Exchange. Among which were the oil giant firm – BP and the biggest mining company – Rio Tinto. The FTSE 100 thus jumped by 0.08 percent to settle at 7,302.42 points.

The Japanese Stock Exchange climbed further riding on upbeat report in manufacturing activities in the Asian market and the decision by the Japanese Finance Minister to rule out speculation of adoption of stimulus policy to stimulate its economic growth. The Nikkei 225 thus jumped to a three-month high as it ended the trading week at an index level of 22,850.77 points, representing 0.22 percent week-on-week gain.

Mixed outturns were recorded on the African equity market, the Johannesburg All Share Index recorded a gain of 2.73 percent as it ended the trading week at 56,650.01 points. The Nairobi All Share Index, similarly, upped by 9.52 percent to close at 164.35 points. The Nigerian All Share Index, however, declined by 0.21 percent to settle at 26,292.30 points.

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

Brent crude oil declined on the international commodities market weighed by concerns of inventory build-up in the global market. Data released by the Energy Information Administration showed that crude inventories rose by 5.7 million above the projected 494,000 barrel-build-up. Brent crude oil thus shed 2.37 percent to trade at $60.55 per barrel.

Gold sustained its gains in the week under review riding on safe haven bids as the decision by the US Fed to trim its interest rates by 0.25 percentage points amid concerns of slowing global growth, boosted demand for the yellow metal. Gold thus rose by 0.52 percent to trade at $ 1,513.20per ounce.

Cocoa rebounded on the international commodities market driven by the living income differential programme adopted by the two top growers – Ivory Coast and Ghana. Cocoa thus surged by 1.05 percent to end the trading week at $2,460.50 per metric tonne.

Coffee rose to two-week high on the international commodities market supported by a rise in the value of the Brazilian real. Coffee thus upturned by 5.25 percent to close at $1.04 per pound.