Financial markets react to coronavirus arrival

Ghana’s financial markets – equities, fixed income and currencies alike – appear to have been largely unaffected by the announcement that the global coronavirus outbreak has finally arrived in the country.

While the equities segment of the Ghana Stock Exchange shed some weight following the dramatic announcement on Thursday evening that two inbound travelers from Norway had tested positive for the infection – the first confirmed cases reported in Ghana since its initial outbreak was reported in China in February – equity analysts and stockbrokers insist the price falls on Friday were not outside the normal trading parameters experienced since the beginning of the year.

While some financial analysts insist that it is still too early for the arrival of the virus in Ghana to affect the country’s domestic financial markets, most assert that it is unlikely that trading and pricing on the markets will be significantly affected before the virus burns itself out as is widely expected by global medical experts.

Most financial market traders and the investors they represent are confident that the warm weather will stem widespread infection in Ghana and forestall the consequent need for measures that would greatly curb economic activity, as is happening currently across many countries in Asia, Europe and the American continent.

On the other hand, some equity analysts point to a fall in the share prices of four listed equities on Friday, a day there were no price gainers, as a sign that the stock market may react to the arrival of the virus. MTN lost 2.86 percent, CAL Bank 2.17 percent, Enterprise Group 1.25 percent and GCB Bank 0.21 percent. The views of those analysts however are being dismissed by the majority as somewhat “alarmist.”

Indeed, the GSE composite index has been falling for the past two years and has shed a further 2.89 percent since the beginning of 2020. However, equity analysts who are tying the market’s performance to the coronavirus outbreak point out that most of the fall so far this year – 2.59 percent – has occurred over the past four weeks, synchronizing the viral outbreak.

On the Ghana Fixed Income Market, yields are expected to rise over the short term as investors anticipate a need by government to raise more money as a buffer against the uncertainties that the coronavirus present. However, such expectations are being curbed by hopes that the Bank of Ghana may take advantage of ongoing monetary easing in the western hemisphere -itself the result of an effort to boost economic activity despite the global lock down – to cut its own benchmark Monetary Policy Rate, which has been kept at 16 percent since January last year despite falling inflation and stable cedi exchange rates, out of fears that monetary easing in Ghana might drive away the foreign portfolio investors that government is reliant on to finance its fiscal deficit.

Instructively, the effects of wide reaching lockdowns in economic jurisdictions across those three continents have not affected Ghana’s financial markets much despite unanimous agreement by economists that the inevitable slow down in global economic growth will impact Ghana’s economy significantly.

Indeed, the ongoing fall in the GSE’s composite index is marginal compared against the hefty falls being suffered in the biggest international stock markets. As at last Friday, year to date, the Dow Jones (an index for the New York Stock Exchange) was down by 24.54 percent; the FTSE 100 (London Stock Exchange) was down by 29.43 percent; the Nikkei 225 (Tokyo Stock Exchange ) was down by 24.88 percent; and the Hang Seng (Hong Kong Stock Exchange), was down 15.8 percent.