IGS FSL weekly investment update (Revised)

Macroeconomic Update

2019 Inflation ended at 7.9 percent.

Consumer Price Index dropped to 7.9 percent at year-end of 2019. This represents 0.30 percentage point decline from the November’s rate of 8.20 percent spurred by the reduced inflationary pressures recorded within the food and non-alcoholic beverages sector in the period under review.

Inflation at the Food and non-alcoholic beverages sector which stood at 8.40 percent (constituting 44.4 percent of the overall inflationary effect) dropped sharply to 7.20 percent in December - representing 39.7 percent of the overall inflation effect.

This was on the back of lower price rise in commodities such as vegetables, fish & sea foods and cereal products when compared to their rate of price change in November 2019. Inflation at the Non-food segments of the economy for the month of December, however, upped by 0.50 percentage points to 8.50 percent primarily driven by high cost of Transportation and Housing.

At the regional level, three out of the ten traditional regions outperformed the national inflation of 7.9 percent. Greater Accra posted the highest inflation for the month of December at a rate of 12 percent. Volta Region followed suit with inflation rate of 9.3 percent and Upper West Region recording an inflation of 8.6 percent. Ashanti Region, however, recorded the lowest rate of 5.0 percent in the month of December. Presented below is the regional inflationary levels for both December and November 2019:

At the close of the week’s auction, the yield on 91-Day T-Bill upped by 2 basis points to settle at 14.69 percent. That on the 182-Day and 364-Day T-Bills, however, remained unchanged at 15.17 percent and 17.83 percent respectively. The yield on the Government of Ghana treasury notes and bonds also remained the same.

Government accepted all the GHS720.79 million worth of bids tendered by investors at the auction. This exceeded the GHS593.00 million target slated to be raised at the week’s auction.

The 91-Day T-Bill dominated Government’s purchase, constituting 89.32 percent share of the overall bids accepted. A total of GHS822.00 million is expected to be raised at the next auction from the issuance of both the 91-Day and 182-Day Treasury bills.

The yield curve sustained its normality as business and consumer sentiment remains robust to propel the deepening of private sector participation in the domestic economy.

The Bank of Ghana Business Confidence Index significantly improved to 98.1 points in August 2019 from 94.1 points in June 2019 and this is expected to offer positive signal amidst other bullish economic indicators for investors to sustain the normality of the yield curve.

The Ghana Stock Exchange recorded a negative week-on-week outturn after the week’s trading activities. This followed significant sell-off recorded on the bourse attributed to the extension of the 2019 bearish sentiment into the new year.

At the closing bell, the GSE Composite Index dropped by 0.29 percent to settle at an index level of 2,252.13 points, representing a year-to-date loss of 0.22 percent. The GSE Financial Stocks Index similarly went down to a year-to-date loss of 0.60 percent.

Market activities saw a decline when compared with the previous week’s outturn. A total of 1.90 million shares valued at GHS1.08 million exchanged hands in the week under review, representing 88.81 percent decline from the previous week’s trading in terms of volume. MTN Ghana Ltd led the activity chart with 54.80 percent share of the overall traded volume. Market capitalization also slipped by 0.12 percent to settle at GHS56,737.00.

On price movements, a total of 5 equities altered their share prices. Republic Bank Ghana Ltd led the bulls run with price appreciation of 4 pesewas to trade at 60 pesewas per share. CAL Bank Ltd and SIC Ltd also added a pesewa each to their week opening prices to trade at 90 pesewas and 9 pesewas per share respectively.

On the flip side, Ecobank Ghana Ltd tumbled by 34 pesewas to occupy the bottom of the laggards list. It ended the week’s trading session at GHS7.75 per share. Intravenous Infusion Ltd also dropped its share price by a pesewa to settle at 4 pesewas per.