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CAPITAL MARKETS AND FOREX OVERVIEW

JULY 2016 REPORT

Ghana
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TREASURY RATE ANALYSIS

  • For the period ended 30 June 2016, yields on the 91- and the 182-day bills were 22.79% and 24.60%, respectively.
  • Rates on the 1-year note and 2-year bonds were unchanged at 23.0% and 24.25% respectively.
  • Over the review period of July 2016, whiles treasury rates on the 91-day bill inched up by a base point while the 182-day bill inched up by 6bps to close at 22.80% and 24.66% respectively.
  • Yields on the 1 and 2-year notes were unchanged.
  • We expect yields on the 91-day treasury bills to increase, albeit, marginally. We also expect the fixed income market to continue to be buoyant as inflation outlook looks bleak.

YEAR-TO-DATE SUMMARY

91-Day 182-Day 1-Yr Note 2-Yr Note
CURRENT* 22.80% 24.66% 23.00% 24.25%
HIGH 22.90% 24.73% 24.00% 24.25%
LOW 22.51% 24.19% 23.00% 23.00%
AVERAGE 22.74% 24.58% 23.03% 23.91%
MEDIAN 22.78% 24.62% 23.00% 24.05%

2016 HALF YEAR TREND

INFLATION RATE ANALYSIS

YEAR ON YEAR INFLATION TREND

  • Ghana’s year-on-year inflation declined marginally to 18.4% for May 2016; a fall of 5bps from 18.9% reported for May 2016.
  • The decline in June was a reversal from the 0.5 percent points increase for May. The year-on-year non-food inflation rate for June decline to 24.1% from 25% in May. Key inflationary drivers include Transport (40.3%), Education (33.3%), Housing, Water, Electricity, Gas and other fossil fuels (32.8%) and Recreation and Culture (27.4%).
  • The year-on-year food inflation rate for June 2016 was 8.6%, up a base point from the 8.5% recorded for May 2016. The price drivers for this category include vegetables (12.5%), oils and fats (11.2%), and fruits (10.4%).
  • Inflation rate for imported items increased to 27.1% in June, from the 18.5% recorded in May 2016. Inflation for locally produced items was however 1.8% higher than the imported items in June.
  • At the regional level, year-on-year inflation rate ranged from 13.8% in the Upper East Region to 22.4% in the Greater Accra.

NB: As of the release of this report, the inflation figures for July 2016 had not been published by the GSS.

MONETARY POLICY RATE

  • The Monetary Policy Committee held its 71st sitting and maintained the Policy Rate at 26.0%. It observed the risks to inflation and growth as balanced.
  • The BoG’s Real Composite Index of Economic Activity (CIEA) reflected a modest pick-up in economic activity. The main factors for the improved economic activity were industrial consumption of electricity, port activities, cement sales and domestic VAT collections.
  • Growth prospects for the rest of the year would be impacted positively by the stability in the foreign exchange market, continued improvement in consumer and business sentiments, and the realization of additional oil and gas production from the TEN oil fields.
  • However, risks to the growth outlook, such as, the tight credit conditions, electricity supply shortfalls and continued fiscal tightness, may moderate the pace of economic expansion.
  • The next MPC meeting is scheduled for September 16 - 19, 2016.

POLICY RATE TREND

GSE ANALYSIS

  • The GSE-CI inched up 49bps for the period,. Year-to-date, the index has declined by 9.96%.
  • The GSE-FSI, also, increased by 0.46% closing the month at 1,678.94. Year-to-date, the index has posted a decline of 13.0%.
  • 9.93 million shares were traded in July 2016. However, liquidity on the bourse fell by 46.07% as value of trade fell to GHS 19.39 million, from GHS 35.95 million in June. Total market capitalization on the local bourse was GHS54.61 billion, representing a 0.34% fall compared to June’s closing value of GHS54.79 billion.

GSE TRADING SUMMARY - JULY 2016

Detail Open Close Change(%)
GSE-CI 1,787.50 1,796.29 0.49%
GSE-CI YTD -10.40% -9.96%
GSE-FSI 1,671.30 1,678.94 0.46%
GSE-FSI YTD -13.41% -13.01%
MARKET CAP. (GHS' BN) 54.79 54.61 -0.34%
MARKET CAP. (US$ BN) 13.96 13.85
VOLUME TRADED (mil. units) 8.78 9.93 13.07%
VALUE TRADED (GHS' mm) 35.95 19.39 -46.07%
VALUE TRADED (US$'mm) 9.19 4.92

GSE-CI RETURN TREND

FOREX ANALYSIS

Monthly Year To Date
CURRENCY %CHANGE %CHANGE AVERAGE HIGH LOW MEDIAN
AUD 3.0% 6.8% 2.8707 3.0768 2.6399 2.8769
CFA 0.0% 4.8% 0.0066 0.0070 0.0063 0.0066
CHF 0.0% 5.7% 3.9699 4.1974 3.8027 3.9688
EUR -0.3% 5.4% 4.3450 4.6036 4.1249 4.3504
GBP -6.3% -8.2% 5.5213 5.9565 5.0928 5.5279
JPY 2.7% 20.6% 0.0353 0.0404 0.0320 0.0350
USD 1.3% 2.5% 3.8980 4.1600 3.7949 3.8839
YUAN 0.8% 0.5% 0.5946 0.6298 0.5759 0.5925
  • Over the reporting month of July 2016, the Ghana Cedi appreciated against the British Pound and Euro. It appreciated 6.3% and 0.3% against the British Pound and Euro respectively. Year to date, the Ghana Cedi has gained 8.2% of its value against the British Pound Sterling.
  • It depreciated against the Australian Dollar, the Japanese Yen, the US Dollar and the Chinese Yuan. It however remained flat against the CFA and Swiss Franc for the period under review.
  • Year-to-date, the Cedi has depreciated against all the reported currencies but the Pounds Sterling with the most significant being the JPY(20.6%), AUD (6.8%), and CHF(5.7%).
  • We anticipate the tight policy stance, inflows from the cocoa pre-export finance facility and expected issuance of the Eurobond in the last quarter would boost reserves, improve liquidity on the foreign exchange market.

Disclaimer

Union Capital Limited has prepared this material. Opinions expressed herein are current opinions as of the date appearing in this material only and are subject to change without notice. In the event any of the assumptions used herein do not prove to be true, results are likely to vary substantially. All investments entail risks. There is no guarantee that investment strategies will achieve the desired results under all market conditions and each investor should evaluate its ability to invest for a long term especially during periods of a market downturn.

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