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2020 Q1 Market Report

Cedi Performance and Macro-Economic Indicators

At the close of the first quarter of 2020, the cedi appreciated against the US dollar, the British Pound and Euro by 1.8%, 8.4% and 4.0%, respectively as compared to the first quarter of 2019 when the cedi depreciated against the US dollar, the British Pound and the Euro by 5.2%, 6.7% and 3.4%, respectively. The performance of the Cedi can be attributed to the Central Bank’s Foreign Exchange (FX) forward auctions in the first quarter of 2020 (which amounted to USD 225.0 million). These auctions were intended to help meet the increasing demand for US Dollars. Another factor that contributed to the performance of the Cedi is decline in imports which can be attributed to the COVID-19 pandemic.

At the end of the quarter under review, inflation rate has been forecasted to remain unchanged at 7.8% (February 2020 inflation) while the monetary policy rate was cut to 14.50% as part of Bank of Ghana’s effort to stimulate the economy and protect the country from the impact of COVID-19. The reduction is expected to increase spending in the Ghanaian economy through reducing the cost of credit and increasing money supply. The first quarter 2020 figures for inflation and monetary policy rates as relatively lower compared to the first quarter of 2019 figures of 9.3% and 16%, respectively. The Table below provides details of the rates and movement in the currency market.

Economic Review

 Q1 2020Q1 2019Change (YoY)
Monetary Policy Rate14.50%16.0%1.5%
Inflation Rate7.8%9.3%1.5%
Economic Metrics Comparison

 2nd Jan
31st March
US Dollar to Ghana Cedi5.535.441.8%
British Pound to Ghana Cedi7.326.758.4%
Euro to Ghana Cedi6.055.974.0%
2020 Q1 Interbank Exchange Rate

Government Borrowing

The Government of Ghana issued a USD 3Billion Eurobond, which was issued in 3 tranches, the first was USD1.25 billion with coupon rate of 6.375% for 7 years, USD1 billion at 7.75% for 14 years and the last USD 750 million at 8.75% for 41 years, the longest dated bond by an African country. The Eurobond issues were about 5 times oversubscribed, attracting about USD 14 Billion in bids. The issuance was to help improve the energy sector, retire maturing debt and support on- going infrastructure development. The 91-, 182- and 364-Day T-Bills began the year at 14.67%, 15.17% and 17.83%, respectively and ended the quarter at 14.64%, 15.15% and 17.65%, respectively. On the average, interest rates for the 91-, 182- and 364-Day T-bills were 14.71%, 15.17% and 17.77%, respectively as compared to 14.68%, 15.12% and 17.90% during the first quarter of 2019. The government also issued three 3-year T-bonds, one 5-year T-bond, the average interest rate of the 3-year T-bond was 20.75%. The interest rate of the 5-year T-bond was 21.70%.

 Q1 2019Q1 2020Difference
91 Day T-bill14.68%14.71%0.03%
182 Day T-Bill15.12%15.17%0.05%
364 Day T-Bill17.90%17.77%0.13%
3 Year T-Bond20.00%20.75%0.75%
5 Year T-Bond 21.70% 
First Quarter Average Interest Rate (2019 and 2020)

Stock Market Performance

The stock market remained bearish as the returns of Ghana Stock Exchange Composite Index (GSE-CI) and GSE Financial Stock Index (GSE-FSI) closed the quarter at -4.32% and -4.79%, respectively. As compared to the first quarter of 2019, which recorded a return of -4.58% % and 0.07% respectively. These movements had an impact on the value of the market, resulting in a total market capitalization value of GH₵ 55,985.55 million which represents a 6.7% YTD decline in value for the Quarter 1,2020 as compared to GH₵59,750.01 million of Quarter 1 2019.

During the quarter, there were 6 gainers. SIC was the top gainer with a return of 25.00%, closing the quarter at GH₵0.10. CMLT was the second largest gainer ending the quarter at GH₵0.11 which represented a 22.22% gain. SCB was the least gainer ending the quarter at GH₵18.94 which represents a 2.93% gain. On the other hand, UNIL led the pack of 12 losers, ending the quarter at GH₵13.98, this represents a 14.76% decline in price. In addition, TLW recorded a 0.08% decline in price, closing at a price of GH₵11.93. 14 stocks remained flat. MTNGH, SOGEGH, CAL have made announcements to pay dividend for the 2019 financial year.

Some developments in the quarter included the appointment of Mr. Ekow Afedzie as the Managing Director of the Ghana Stock Exchange. He was the Deputy Managing Director for the exchange for 10 years. His rich experience and remarkable dynamism is expected to help the Exchange during this critical period of modernizing and transitioning from a frontier market to an emerging market to attract more investors and improve market efficiency. Another highlight of the quarter was the approval of a merger of three Pharmaceutical firms – Dannex Limited, Ayrton Drugs Manufacturing Limited and Starwin Products Limited to form a new entity – DAS Pharma PLC by the Exchange. A remarkable advancement of the market was the signing of Memorandum of Understanding (MoU) between the Ghana Stock Exchange (GSE) and the London Stock Exchange Group (LSEG) to collaborate and support the development of the capital market in Ghana. The LSEG will assist the GSE move from a frontier market to an emerging market, support cross-listing between the LSE and the GSE and raise awareness on capital raising opportunities.

The performance of the gainers and losers on the GSE has been highlighted in the tables below.


ShareYear High (GH₵)Year Low (GH₵)Year Open (GH₵)Closing Price (GH₵)Gain (%)
2020 Q1 Gainers – Ghana Stock Exchange


ShareYear High (GH₵)Year Low (GH₵)Year Open (GH₵)Closing Price (GH₵)Loss (%)  
2020 Q1 Gainers – Ghana Stock Exchange

Key Highlights of the Impact of COVID-19 on Ghana’s Economy

COVID-19 has affected Ghana’s economy in areas such as production, trade and, investment, global commodity prices, tourist flows, fiscal stance and human life. There is a general slow-down in global economic growth and disruptions in supply chain, which will have a negative impact on Ghana’s growth. The government is seeking to secure GHS 1.7billion (USD 297.2million) from the World Bank and GHS 3.1billion (USD 544.6million) from the IMF to fill the budgetary deficit gap. A part of COVID-19 Preparedness and Response Plan fund of USD 100.0mn will be allocated to health workers to detect and investigate cases, build capacity for early diagnosis and to increase awareness.

The 2020 projected GDP growth rate could decline from 6.8% to 1.5% due to the economic slow-down caused by the COVID-19 crisis. In the case of full lockdown, the impact on projected GDP growth will worsen. The total estimated impact of COVID-19 on the budget amounts to GHS 9.5billion (USD 1.6billion), that is 2.5% of revised GDP. Other impacts includes:

  1. Shortfall in import duties by GHS 808.0million (USD 140.00million)
  2. Shortfall in non-oil tax revenue to GHS2.3billion (USD 390.30million)
  3. Shortfall in crude oil receipt amounting to GHS5.7billion (USD987.10million)
  4. Increase in health-related government expenditure which will cost GHS 572.00million (USD 99.1million)
  5. Tight financing conditions
  6. The overall fiscal deficit is projected to be GHS30.20billion (USD5.20billion), 7.8% of revised GDP
  7. The pandemic is also projected to significantly reduce foreign direct investment inflows in 2020.

Global market and Outlook of the impact of COVID -19

On the global market, many economies have been hit hard, stock markets are down, production has slowed down, Eurobond prices are low, causing bond yields to increase and most economies are set to stagnate. Major commodity prices have also been affected and recorded huge slums as well. Oil prices have drastically plunged, the global decline in prices of crude oil has resulted in a YTD decline of about -64%, from USD 63.2 to USD 20.48 per barrel as at 31st March, 2020. This has resulted in significant projected shortfalls in Ghana’s petroleum revenue for the 2020 fiscal year and the global economy as well. Cocoa prices have also dropped from USD 2,457.47 to USD 2,218.36 bringing the YTD to -6%. Gold prices have however moved from USD 1,529.30 to USD 1,596.60 representing a YTD return of 15%. The US Federal reserve slashed interest rate from 1.75% at the beginning of the year to 0.25% by the end of the quarter to stabilise the market,

as well as the economic activity. Central banks around the world have intervened in various drastic ways to provide the needed fiscal support for their economies.

2020 Outlook and Investment Implications

The year 2020 had a promising outlook due to government’s ambitious plans outlined in the 2020 budget, especially in the infrastructure and agriculture sectors. Ghana’s economy was expected to be among the fastest growing in Africa. The IMF revised Ghana’s growth rate to 5.6% for 2020 putting Ghana as the third fastest growing economy for Sub-Saharan Africa, in addition to World Bank’s projection at 6.8%, well above Sub-Saharans average growth rate at 3.5% for 2020.

The Cedi experienced some pressures at the tail end of the first quarter of 2020 as some foreign investors began to disinvest from local bonds amid growing uncertainty about the COVID-19 pandemic. The Cedi is likely to remain stable as the COVID-19 crisis has triggered a reduction in trading activity in the currency market.

On the capital market, the GSE Composite and GSE Financial Stock Indices continue to record negative returns. We do not anticipate any significant changes in the stock’s performance in the short term as investors adopt a wait-and-see attitude amidst increasing uncertainties of the impact of the COVID-19 on the economy. We anticipate increase demand in dividend paying stocks such as GCB, SCB, CAL, SOGEGH, MTN and EGL as well as stocks with strong 2019 financial performance. We expect stocks in the oil sector and the manufacturing to witness further declines, due to decline in world crude oil prices. The depreciation of the cedi will negatively impact the cost of sales of manufacturing companies as they import raw materials. The possible decline in share prices present buying opportunities for investors who will like to take advantage of the low share prices on the stock market. Investors can increase shareholdings in anticipation of future price appreciation.

On the Ghana Fixed Income Market, yields are expected to rise over the short term as we anticipate government to raise more money as a buffer against the uncertainties that the coronavirus present. Due to the likely slowdown in the economy as a result of the COVID-19 pandemic, the Bank of Ghana has cut the Monetary Policy Rate to 14.50% to boost economic activity. Eurobond prices in the frontier and emerging markets have significantly dropped and consequently yields have increased. This may present an opportunity for investors to maximise returns on their Eurobonds investments in the long run. This investment strategy has its challenges due to the uncertainties of the time frame between the resolution of the COVID-19 of pandemic and economic recovery. Again, there are buying opportunities on the upper end of the yield curve, as investors can purchase longer term securities to maximise returns.

As your fund manager, we will continue to monitor the investment markets closely in order to take full advantage of the investment opportunities that will enable us maximise your returns given your stated desired risk tolerance level. Thank you for giving us the opportunity to serve you.

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