• January Inflation at 7.8 percent.
• Interest rate on 2-yeat note dropped by 75 basis points.
• GSE equity indices recorded mixed outturns. 
• Cedi sustained upward trajectory, recorded its 3^rd straight weekly gain against all 3 major trading currencies. 
• Coffee rebounded as Vietnam production threatened by unfavourable climatic conditions.  

Macroeconomic update

January Inflation at 7.8 percent

Inflation for January dropped by a basis point from December 2019’ rate of 7.9 percent to settle at 7.8 percent. The downtrend was as a results of lower inflation pressure at the non-food sector of the economy easing by 6 basis points from the previous rate of 8.4 percent to settle at 7.8 percent driven by Education, Electric appliances, Electricity and Sport equipment which recorded negative inflationary pressures. Food and non-alcoholic beverages, however, had its inflation rising by 23 basis points to 7.8 percent in January accounted by rising cost of Vegetables and Fish across the country. On regional basis, Central Region had the highest inflation record of 10.0 percent which was closely followed by the Volta Region which recorded inflation of 9.6 percent. The Ashanti Region, however, had the lowest inflation rate of 5.6 percent. Presented below is the 1-year 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.

At the close of the week’s auction, the yield on the Government of Ghana short-dated treasury securities were unchanged. The yield on the 91-Day T-Bill remained at 14.70 percent. Interest rates on the 182-Day and 364-Day T-Bills were also unchanged at 15.18 percent and 17.81 percent, respectively. The yield on the 2-year note, however, declined by 75 basis points from a previous rate of 20.95 percent to settle at 20.20 percent. 

Government accepted GHS1,006.16 million worth of bids at the week’s auctions out of GHS1,073.40 million bids tendered by investors. This fell below the GHS1,037.00 million target set to be raised in the week under review but above the GH861.12 million worth bids accepted by Government at the previous auction. The 2-year note dominated Government purchase at the week’s auction constituting 45.47 percent of the overall bids accepted by the Government. An amount of GHS797.00 million is expected to be raised at the next auction from the issuance of both the 91-Day and 182-Day T-Bills. 

Illustrated in the above diagram, is the term structure of the Government of Ghana treasury structure. This sustained its normality as investor sentiment in the domestic economy continue to improve amidst the relatively attractive nature of the capital market to other markets of the economy. The yield curve is expected to sustain its normality in the near term as macroeconomic stability deepens.

Ghana Stock Exchange

The Ghana Stock Exchange saw recovery in the benchmark composite index following the release of some positive earnings on the Bourse. Guinness Ghana Brewery Ltd, Fan Milk Ltd, Unilever Ghana Ltd and Mega Capital posted impressive records in the year ended 2019. The profit-after-tax of Guinness Ghana Brewery Ltd, for instance, grew by 31 percent and Unilever overturned its losses in 2018 of GHS141.26 million to a positive value of GHS191.29 million in 2019, aiding in the recovery of the main market index.

Daunting outturn of some financial stocks like SIC which had its profit-after-tax dropping from GHS44.66 million in 2018 to GHS8.56 million in 2019 and similar trend for Enterprise Group Ltd, however, weighed on the financial stock index. At the close of trading the GSE Composite Index thus rose by 0.31 percent to settle at an index level of 2,203.63 points, representing a year-to-date loss of 2.37 percent. The GSE Financial Stocks Index, however, eased by 0.25 percent to settle at 2,012.78 points, corresponding to a year-to-date loss of 0.34 percent.

Market outturn was much higher than recorded at the previous week’s trading session. Total volume of shares which exchanged hands in the week’s trading was 4.62 million valued at GHS3.13 million, representing 86.29 percent increment from the 2.48 million shares worth GHS2.08 million traded at the previous session. MTN Ghana Ltd led the activity chart with 88.21 percent composition of the overall traded volume. Market capitalization also rose by 0.13 percent to settle at GHS56,625.40 million last Friday.

Stock Price Movements

In all, a total of 7 equities altered their share prices with 3 appearing on the bulls list and 4 on the bears list. Standard Chartered Bank Ltd led the bullish run with a price lift of 4 pesewas to trade at GHS19.04 per share. MTN Ghana Ltd and SIC Ltd gained a pesewa each to trade at 67 pesewas and 9 pesewas per share, respectively.

On the bears list, Ecobank Ghana Ltd performed poorly in the week’s trade, losing 9 pesewas of its share price to close at GHS7.80 per share. Guinness Ghana Brewery Ltd and Enterprise Group Ltd went down by 7 pesewas and 4 pesewas to trade at GHS1.62 and GHS1.60 per share, respectively. Fan Milk Ltd also shed a pesewa to trade at GHS7.80 per share.

Currency Market

Source: Bank of Ghana 14.02.2020

The Ghana cedi sustained its rally on the interbank currency market, registering its third straight week-on-week appreciation against all the three major trading currencies. The US dollar ended the trading week with a marginal gain on the international forex market on strong economic footing from the world’s largest economy. Data released in the week under review solidified economic recovery in the region as retail activities for the month of January grew by 0.3 percent in addition to bullish outturn of US’ Services and Manufacturing sector in the month of January. Weekly jobless claims for US Construction sector also improved as it fell short of the 210,000 target to 205,000 in the week ended 7^th February 2020. Inflation also improved to its highest in 15 months in the US as it upticked by 2 basis points to 2.5 percent. Despite these, the US dollar was on the low demand in the domestic market resulting in 1.18 percent depreciation versus the local currency as it traded at GHS5.30. The year-to-date appreciation of the cedi thus rose to 4.46 percent last week.

The British pound advanced on the international currency market as it jumped from a 2-and-half month low after the week’s trading session. The recovery of the British pound was spurred by strong data from UK’s Services and Manufacturing sector; with the latter bouncing back from the contraction in January to its highest in nine months. Overall economic activities as measured by GDP in also rose marginally to 1.4 percent in 2019 from 2018’s growth rate of 1.3 percent. The replacement of former UK’s Finance minister Sajid Javid for Rishi Sunak stoked optimism that he will allow fiscal supports that will ease pressure on the Bank of England to lower interest rates. The British pound, however, tumbled versus the cedi recording a week-on-week depreciation of 0.71 percent as it reduced its selling pressure to GHS6.90. The year-to-date appreciation of the cedi thus rose to 6.13 percent.

The Euro was on the defensive dropping to its lowest in 4 months on the international currency market. Strings of weak economic data from the block amidst ill outlook of the Eurozone weighed on the single currency in the week’s trading. Dwindling retail sales data by 1.6 percent in December 2019, lower-than-expected growth in industrial production by 2.1 percent in December 2019 sparked recession fears in the bloc. A dismal factor survey report released in the trading week also added mounting evidence of deteriorating economic activities within the bloc which affected demand for the single currency. The Euro thus ended with a weekly depreciation of 2.24 percent as it selling price fell to GHS5.75 leaving the cedi with a year-to-date appreciation of 8.00 percent.

International Markets

US equity market closed bullish as investors focused on upbeat corporate results to ignore the growing ill sentiment around the COVID-19. 4^th quarter earnings of listed companies are averagely expected to up by 15.5 percent from the 2019’s results which contributed to bullish closure of the market. The S&P500 Index thus rose by 1.58 percent to settle at an index level of 3,380.16 points. The Dow Jones Industrial Average also rose by 1.02 percent to settle at 29,398.08 points.

The London Stock Exchange tumbled on lackluster trading sentiment of investors as they failed to capitalize on barrage of news in the trading week. Rebranding effort and a green-friendly investment move by the Royal Bank of Scotland, a name change to NatWest Group and declaration and increase in dividend was unable to close the Bourse in the gain. The FTSE 100 thus went down by 0.77 percent to settle at an index level of 7,409.13 points.

The Japanese Stock Exchange closed in the red as investors’ hopes and risk-taking sentiment dented on news that death toll of the coronavirus rose sharply in the week under review. China’s Hubei province on last Thursday reported 242 new deaths as it doubled the previous day’s toll and subsequently confirmed 14,840 new cases on February 12^th. This affected stocks within the Paper & Pulp, Railway & Bus and Real Estate sectors. The Nikkei 225 thus went down by 0.59 percent to settle at 23,687.59 points.

On the African equity market, the Johannesburg All Share Index ended positively with a weekly rise of 1.02 percent to settle at 57,861.76 points. The Nigerian All Share Index, however, dropped by 1.11 percent to settle at 27,755.87 points whereas the Nairobi All Share Index also eased by 3.72 percent to close at 162.37 points.

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

Brent crude oil recorded its first gain in six weeks since the intensification of the spread of the deadly coronavirus in China. The rise is attributed to investors’ hope that major producers will cut global supply further after the International Energy Agency slashed its global demand forecast for the first half of the year by 200,000 barrels per day. It is expected that OPEC and its allies could further trim supply by 600,000 barrels per day to avoid the building up of excess supply as demand in China drops on account of the virus. Brent crude oil thus added $2.85 to trade at $57.32 per barrel.

Gold made modest gains on the international commodities market as investors digested the potential impact of the spread of the COVID-19 in china on global economic activities. The uncertainties surrounding the death toll and the fast spread of the pandemic shifted market demand for the safe-haven asset. Gold thus added $14.10 to trade at $1,582.70 per ounce.

Cocoa gained marginally as adverse weather conditions threatening the outlook of the soft crop ahead of the September-April season sparked demand pressure. Dry weather conditions with no rain in Ivory Coast has resulted in the downward revision in the amount of beans to be exported to the global market in the upcoming season. Export which was targeted at 527,000 tones is expected to fall within the region of 350,000-400,000 tonnes. Cocoa thus added $4.00 to settle at $2,904.00 per metric tonne.

Coffee whipsawed its downtrend as unfavourable climatic conditions in Vietnam affected supply of the beans onto the international commodities market. Coffee thus added 11 cents to end its weekly sales at $1.09 per pound.

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