Brexit provides breather for Ghana’s bonds
Great Britain’s decision to exit the European Union has provided good news for Ghana’s bond market, the Chairman of the Ghana stock Exchange (GSE) Council, Dr Sam Mensah, has said.
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He said the exit led to the rallying of emerging market bonds, which was good for Ghana because the country’s Euro bonds had rallied and its yields had come down.
“This is good news for us because it means we can now borrow at a slightly lower cost than before,” he stated.
Dr Mensah said this in an interview with the media after the Annual General Meeting of the Ghana Stock Exchange.
Great Britain recently in a poll announced its decision to exit the European Union.
As a result, bonds in emerging Europe rallied on speculation the UK’s departure will force central banks to ease monetary conditions to support their economies.
Stock Exchange performs poorly in 2015
The Ghana Stock Exchange ended the year 2015 poorly as its composite index ended the year at 1,994.91 points, representing an 11.77 per cent loss, compared to the 5.4 per cent positive growth it recorded in 2014.
Market turnover in 2015 was also lower than the previous year as the volume of shares traded for the year 2015 stood at 246 million shares valued at GH¢247 million, compared to the volume and value of 207 million and GH¢346 million, respectively, which was recorded in 2014.
The 2015 market turnover represented a gain of 18.8 per cent in volume but a 28.4 per cent drop in the value of shares traded.
The market capitalisation for all listed securities at the end of December 2015 also stood at GH¢57.1 billion, compared to GH¢64.4 billion in 2014, representing a decrease of 11 per cent.
Domestic market capitalisation also fell by 19 per cent, ending December 2015 at GH¢11.2 billion compared to GH¢13.9 billion in 2014.
Reasons for the poor performance
Dr Mensah said the poor performance was as a result of market conditions which were not conducive, particularly the micro economic environment.
He said the energy crisis, coupled with the depreciation off the cedi against the dollar and the increase of the Bank of Ghana prime rate from 21 per cent to 26 per cent, hit hard on industry, forcing many to cut back on production and lay off staff.
“The energy crisis, for instance, took a serious toll on the manufacturing environment and all of the manufacturing companies listed recorded losses or decreased profitability,” he said.
Demutualisation
The GSE during its 25th anniversary lecture announced its decision to convert the exchange into a publicly listed entity similar to any of the 38 companies currently trading on the local bourse.
The process, which is known as demutualisation, is to allow the exchange to independently raise fresh capital to fund its activities such as expansion and modernisation.
It will also give the bourse autonomy from government interference, while injecting private sector expertise and efficiencies into its operations.
Dr Mensah said the exchange had put together a committee that would begin work soon to provide a step by step strategy towards demutualisation.
“The committee is about to start sitting and we expect significant progress towards demutualisation by next year,” he said. — GB