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Petroleum funds’ portfolios set to make positive returns

Fri, 17 Aug 2018 Source: Goldstreet Business

The mounting downside risk to global economic expansion in the near to medium term, have begun impacting positively on the marked to market valuations of the portfolios of the Ghana Petroleum Funds (GPF).

The total return, year to date, from the Ghana Heritage Fund (GHF) and the Ghana Stabilization Fund (GSF) were -0.90 percent and 0.65 percent respectively.

The BoG’s semi-annual report for 2018 on the Petroleum Holding Fund (PHF) and the GPF indicates however that, the current market developments will cause safe haven bond yields to fall, which will be having a positive impact on the returns of the GPF.

For the first half of 2018, the GSF and GHF received an allocation of US$150.84 million and US$64.65 million respectively during the first half of 2018, from the total petroleum revenue distribution of US$475.86 million, from the PHF.

As the risks on the global front gathers momentum and materialises, it is expected to lead to a deterioration of investors’ risk appetite, portfolio reversals from risk assets and a flight to quality.

The realised income on the GPFs in first half was US$6.49 million (GHF contributed US$4.04 million and GSF contributed US$2.45 million) as compared to the 2017 total net realised income of US$4.82 million.

GSF and GHF accumulated reserves were US$428.67 million and US$413.58 million respectively.

According to the International Monetary Fund (IMF), advanced foreign economies like the United States, China, Japan, and in the Euro area are estimated to witness dimming growth outlook, exacerbated by risks which are expected to materialise in the medium term.

These risks include the rich equity and bond market valuations and low volatility in an environment of high policy uncertainty, anticipated to increase the likelihood of market correction which could dampen growth.

Further to this is the escalation of trade tensions, which could undermine business and financial market sentiment, denting investment and trade, and some aggressive rollback of financial regulations, as envisaged in US, could spur excessive risk taking and increase the likelihood of future financial crises.

Due to the impairing risks, the United States is expected to grow at 2.4 percent in 2018 and ease to 2.2 percent in 2019, whilst growth in the euro area is projected to witness a downward revision of 0.2 percentage point for 2018 and a 0.1 percentage point for 2019.

Also in Japan, growth is estimated to witness a downward revision of 0.2 percentage points, following a contraction in first quarter, while growth in China is projected to moderate from 6.9 percent in 2017 to 6.6 percent in 2018 and to 6.4 percent in 2019 as regulatory tightening of the financial sector takes hold and external demand softens.

The total petroleum revenue received into the PHF comprises the lifting proceeds of the Ghana Group, surface rentals, and PHF income and corporate income tax.

Of the total petroleum revenue distributed, US$12.29 million, which was received in the second half of 2017, was distributed in the first half of 2018 with the 41st Jubilee lifting.

Furthermore, the Ghana National Petroleum Corporation (GNPC) received US$142.82 million, while the Annual Budget Funding Amount (ABFA) received US$117.55 million, of the total petroleum revenue distributed.

Source: Goldstreet Business