Macroeconomic Update

April’s PPI at 7.4 percent

Producer’s price inflation for the month of April 2020 settled at 7.4 percent, representing 60 basis points rise over March’s rate of 6.80 percent. Inflationary pressures within the Mining and Quarrying sub-sector significantly contributed to the rise and mainly from the extraction of metal ores which saw about 10 percentage points rise. PPI for the Mining and Quarrying sub-sectors thus upticked by 143 basis points from 23.70 percent to 38.00 percent. Inflationary pressures were, however, lower within the Manufacturing and Utilities sub-sectors following the recent commitment to use ingenious raw materials within the industry space. On the back of this, PPI for the Manufacturing sub-sector dipped by 160 basis points to 0.5 percent. That for the Utility sub-sector also eased by 10 basis points 12.1 percent in April. Presented below is the trend analysis of the PPI.

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.

Last Friday, interest rates were upwardly adjusted with the yield on the 91-Day T-Bill rising by 19 basis points to settle at 14.06 percent. Yield on the 182-Day T-Bill also rose by 5 basis points to settle at 14.05 percent. Interest rates on the 364-Day T-Bill and those on the Government of Ghana treasury notes and bonds were, however, unchanged as they were not scheduled for the week’s auction.

Total bids tendered by investors at the week’s auction stood at GHS1,061.22 million, and the Government accepted all bids. This exceeded both the week’s target of GHS909.00 million and the GHS652.94 million worth of bids purchased by the Government at the previous auction. The 91-Day T-Bill was the most bids accepted at the auction, constituting 78.74 percent of the total bids accepted by the Government. Government anticipates raising GHS1,124.00 million worth’s of bids at the upcoming auction.

The yield curve sustained its normality amidst the rate adjustment recorded at the primary market. The safe-haven nature of the money market in comparison to other investing markets, has significantly contributed to demand uptick for Government securities, hence, contributing to the normality of the yield curve. This is expected to be sustained in the near term even as COVID-19 uncertainties dissipate.

Ghana Stock Exchange

The Accra Bourse equity indices posted mixed outturn after the week’s trading activities. The significant sell-off in some financial stocks vis-à-vis the recoveries in some non-financial stock as investors reacted to the dividend suspension by the central bank in a bid to protect financial institutions resulted in the week’s mixed performance. The GSE Composite Index thus made a weekly gain of 1.42 percent to settle at 2,011.97 points, representing a reduced year-to-date loss of 10.86 percent. The GSE Financial Stocks Index, however, recorded a week-on-week decline of 0.02 percent as it settled at 1,840.80 points corresponding to a year-to-date loss of 8.86 percent.

Market outturn was much lower than recorded at the previous week’s auction. A total of 1.20 million shares valued at GHS3.24 exchanged hands as compared to the 11.75 million shares worth GHS8.16 million which traded at the previous week’s auction. CAL Bank Ltd led the activity chart with 37.01 percent share of the overall traded volume. Market capitalization, however, upped by 0.54 percent to settle at GHS54,279.82 million.

Stock Price Movements

On price movers, a total of nine equities altered their week opening prices out of which 2 stocks recorded gains. Benso Oil Palm Plantation Ltd top the bulls list with price uplift of 45 pesewas to trade at GHS7.45 per share. Mechanical Lloyd Company Ltd also surged by 3 pesewas to close at 61 pesewas per share.  

Cocoa Processing Company Ltd posted the worst decline after losing 61 pesewas of the week’s opening prices to settle at GHS3.39 per share.  SIC Ltd and Clydestone (Ghana) Ltd tumbled by 50 pesewas and 13 pesewas to trade at GHS17.00 and GHS1.49 per share, respectively. Enterprise Group Ltd and DASPHARMA Ltd had their share prices trimmed by 7 pesewas and 2 pesewas to end the week’s trade at 70 pesewas and GHS4.48 per share, respectively. Republic Bank Ghana Ltd and Fan Milk Ltd also fell by a pesewa each pesewa to trade at 49 pesewas and GHS1.59 per share, respectively.

Currency Market

Source: Bank of Ghana 22.05.2020

On the interbank currency market, the Ghana cedi depreciated against all the three major trading currencies. The US dollar posted a marginal gain as US-China trade tension fuelled investor’s demand for the safe haven currency. Hopes of a trade deal hit a snag in recent weeks as new legislation by the US Senate when passed could force Chinese stocks to delist from American exchange coupled with a potential cut off chip supplies to Huawei. The US dollar thus recorded a weekly gain of 0.05 percent to trade at GHS5.62 on the interbank currency market. The year-to-date depreciation of the cedi thus rose to 1.45 percent.

The British Pound recovered from a seven-year low against major trading peers buoyed by improving risk sentiments. The Pound’s surge was driven by emerging reports of a successful COVID-19 vaccine trial by Moderna Inc and the reopening of some global economies which boosted investor’s risk appetite. The Pound’s gain was, however, trimmed following heightened uncertainties in the Post-Brexit talks with the European Union and increased speculation of Bank of England rolling-out negative interest rates policy. The British Pound thus appreciated by 0.59 to sell at GHS6.85 on the interbank currency market. The year-to-date appreciation of cedi thus eased to 6.50 percent.

The Euro firmed on account of the release of upbeat economic data and proposals of a euro-recovery fund. In the week under review, plans to set-up a 500-euro Franco-German recovery fund aimed at providing financial assistance to member states in the bloc as well as critical sectors in the economy affected by the pandemic, improved investor’s confidence. The single currency was also supported by strong Purchasing Manager’s Index for the region which rose 30.5 in May from 13.6 in April, its highest in three months. The Euro thus benefitted from these developments as it appreciated by 0.76 percent to trade at GHS6.12. The year-to-date appreciation of the cedi thus declined to 1.54 percent.

International Markets

Wallstreet capped some gains at the close of the trading week ended 22^nd May 2020 as investors’ optimism over the reopening of the global economies kept souring amidst prospects for COVID-19 vaccine. The S&P 500 recorded a week-on-week rise of 3.20 percent to settle at an index level of 2,955.45 points. The Dow Jones Industrial Average also advanced by 3.29 percent as it settled at 24,465.16 points last Friday.

The London Stock Exchange closed the week’s trading in the gains despite disappointing UK retail sales data which fell by 18.1 percent in April from March’s figure and expectations that the proposed restrictions on China could heavily affect stocks on the bourse. These developments were, however, unable to fully blur support from investors’ optimism surrounding the COVID-19 vaccine prospects and economic reopening. The FTSE 100 thus made a weekly rise of 1.23 percent to settle at 5,993.28 points.

The Nikkei 225 was lifted by high demand for shares of Paper & Pulp, Railway & Bus and Real Estate sectors after news that global economic activities were gradual picking up. The Nikkei 225 thus posted a week rise of 1.75 percent to settle at 20,388.16 points.

On the African equity market, the Johannesburg All Share Index recorded a week-on-week gain of 1.31 percent to settle at 51,147.00 points.  The Nigerian All Share Index rebounded by 5.59 percent to 25,204.75 points. The Nairobi All Share Index also recorded a week-on-week gain of 3.74 percent to settle at 140.39 points.

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

Brent crude oil climbed further as global demand creeped back on account of a gradual surge in airlines and transportation movements. Brent crude oil’s gains also stemmed from production tightening resulting from the lack of storage facilities and decision by OPEC to lower daily production by about 9.7 billion barrels. Brent crude oil thus added $2.33 to trade at $34.83 per barrel.

Gold dimmed its safe-haven appeal in the week’s trade following hawkish sentiment from the US Fed about the pace of recovery of US economy and projected benefit of its supportive programs to businesses and households. With investors risk sentiment surging, Gold trimmed $22.40 to trade at $1,733.90 per ounce.

Cocoa suffered another round of weekly loss on the international commodities market on unfavourable climatic conditions which triggered concerns over the quality and size of the crop in top grower – Ivory Coast. Cocoa thus lost $51.50 to trade at $2,347.50 per metric tonne.

Coffee tumbled on investors’ continued assessment of the bright outlook of soft crop in Brazil and demand distraction resulting from the global pandemic. Coffee thus shed a cent to trade at $1.04 per pound.

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