Ghana Stocks - Worst of 2009,

... 30% Jump Expected in 2010
Ghana’s benchmark stock index, the world’s worst performer this year and the best of 2008, will rally in 2010 as the country is set to become Africa’s newest oil exporter, according to Exotix Ltd.

The Ghana Stock Exchange’s All-Share Index is likely to climb 25 to 30 percent next year as the west African nation starts producing oil for export, said Christopher Hartland-Peel, a London-based analyst at Exotix, the investment bank focused on emerging markets.


“We view Ghana as one of the countries that are going to be among the strongest growing” in Africa, Hartland-Peel said in a phone interview. “The reason for this is oil.”


Ghana’s benchmark equity index has fallen 49 percent this year, after gaining 58 percent in 2008. The bourse plummeted as international investors fled assets perceived as risky during the height of the global credit crisis, and a depreciation in the currency triggered 20 percent inflation and a $1 billion International Monetary Fund bailout.


Stocks are poised to rebound as Ghana’s Jubilee oil field, off the country’s western coast, is scheduled to start production in the fourth quarter of 2010. Discovered in 2007, the field may hold as much as 1.8 billion barrels of oil, with initial production estimated at 120,000 barrels a day, according to Tullow Oil Plc, which owns a 34.7 percent stake in the field. Ghana will be one of the world’s top 50 oil producers, according to Tullow.


Treasury Yields

Oil revenue will help Ghana to recover from an economic crisis that drove its currency, the cedi, down 15 percent against the dollar in the six months through July. The depreciation boosted the cost of imported goods, lifting consumer price inflation to a five-year peak of 20.7 percent. Borrowing costs soared as the rate on 91-day Treasury bills doubled from a year earlier to as high as 24.7 percent. The average yield at the most recent auction was 24.1 percent.


Stocks won’t rebound until an economic recovery reduces bond yields, according to Hartland-Peel, who in August predicted a “gradual recovery” for stocks. “If you can get 23 to 24 percent in Treasury bills, why put your money in the stock market?” he said.


High inflation and interest rates are the “greatest” challenge facing the bourse, Ekow Afedzie, deputy managing director of the Ghana Stock Exchange, said in an interview in Abuja, Nigeria, on Dec. 3. “Once we get these going in the right direction, the market will rebound,” Afedzie said.


The central bank cut its key lending rate for the first time in nearly three years last month, by 50 basis points to 18 percent. Further cuts may follow after consumer inflation fell for the fifth straight month to 16.9 percent in November.


Guinness, Unilever

The country’s budget deficit will fall to about 10.2 percent this year and 7.5 percent in 2010, from a peak of 24.2 percent in 2008, Finance Minister Kwabena Duffuor said last month. Economic growth will likely reach 5.9 percent this year and 6.5 percent in 2010, the government predicts, after a growth of 7.3 percent in 2008.


The cedi has gained 4.9 percent against the dollar since the International Monetary Fund agreed in July to lend Ghana $1.02 billion over three years.


Companies that suffered declining profits this year including Guinness Ghana Breweries Ltd., the country’s biggest beer maker, and the local unit of Unilever Plc, will rebound as the economy recovers in 2010, according to Exotix.


Guinness Ghana fell 32.5 percent this year and jumped 63 percent in 2008. The company, based in Accra, said Nov. 17 profit for the year ending in June fell 17 percent to 11.4 million cedis ($8 million).


Pension Plan

Unilever’s local producer of household products such as Omo laundry soap and Blue Band margarine said Oct. 30 net income for the nine months through September fell 96 percent to 1.05 million cedis. Unilever Ghana Ltd. dropped 15 percent this year and rose 190 percent in 2008.


Ghana Commercial Bank, the country’s biggest lender with 157 branches, lost 36 percent this year.


The stocks may also benefit from 1 billion cedis set to be invested in Ghana’s securities markets through a government pension-reform program that starts next year, allowing private brokers to develop and manage corporate retirement plans.