Ghana’s economic outlook downgraded into the negative by Moody

Ghana’s economic outlook has been altered from positive to negative by the rating agency-Moody. The downgrade follows tightening domestic (tax) revenue and external funding conditions associated with the devastating impacts of the covid-19 pandemic on global economic activities. This is projected to adversely affect the Ghana's debt affordability i.e. (annual interest payments/revenue) as it surpasses 40% in 2020. Following the anticipated widening of current account deficit, huge capital outflows from non-resident investors in the local currency market as well as outstanding energy sector arrears of $2.7 billion (or 4.1% of GDP) at the end of 2018, Moody’s projects a debt–GDP ratio for Ghana of about 70% in 2020. Despite this, Moody has affirmed a B3 rating for Ghana's long-term senior unsecured bonds, signifying emerging strength following the recently fiscal reforms implemented under the IMF program and Public Financial Management Act (2016).

Source: BOG; MOFEP; GSS.     * represents provisional estimate

Government of Ghana Treasury Securities

NB: The above are the annual yields on Government of Ghana Treasury Securities.

At the close of the week’s auction, the interest rates on the short-dated treasury securities witnessed mixed adjustment. The yield on the 91-Day T-Bill rose by 18 basis points to settle at 14.03 percent whereas that on the 182-Day T-Bill upped by 4 basis points to 14.03 percent. The yield on the 364-Day T-Bill however, dipped by 5 basis points to settle at 16.74 percent. Yields on the Government of Ghana treasury notes and bonds were, however, unaltered as they were not scheduled for the week’s auction.

Government raised an amount of GHS1,134.85 million out of the GHS1,146.57 million tendered by investors. This fell slightly below the previous week’s value of GHS1,358.77 million and the GHS1,208.00 million targets set for the week. Among the bids raised, the 91-Day T-Bill was the most accepted bid, constituting 72.39 percent. In the upcoming auction, an amount of GHS603.00 million is expected to be raised from the issuance of both the 91-Day and 182-Day T-Bills.

The yields curve sustained its normality amidst the rate adjustment observed in the week under review. The recent downtrend in yields has been necessitated by the covid-19 triggered shocks on the economy resulting in shortfall in government’s domestic and external finance. Government’s borrowing on the domestic market coupled with recent concessionary funding from international agencies such as IMF($1 billion) and World Bank( $300 million)  is  expected to offer government the needed fiscal space to mitigate the impact of the pandemic and spur economic growth.

Ghana Stock Exchange

The Ghana Stock Exchange ended the trading week in the gains spurred by dwindling ill sentiment associated with COVID-19 as Government lifted the ban on a partial lockdown. On the back of this, high demand for some heavily capitalized stocks such as Ecobank Ghana Ltd and MTN Ghana Ltd significantly trimmed losses on the bourse.  In the week under review, investors increased their risk appetite for top-weighted stocks with robust financial performance trading below their book values in a bid to consolidate their long-term gains. The GSE Composite Index, thus rebounded by 0.81 percent to settle at 2,152.63 points, representing a year-to-date loss of -4.63 percent. In a similar vein, The GSE Financial Stocks Index recorded a week-on-week gain of 0.60 percent to close at 1,891.23 points corresponding to a negative year-to-date return of 6.36 percent.

Market activities waned as compared to the previous week’s outturn. A total turnover of 419,977 shares valued at GHS722,370 exchanged hands as against the 1.00 million shares worth GHS1.50 million traded in the week ended 17^th April 2020. MTN Ghana Ltd dominated market activities, accounting for 76.93 percent of the overall trades. Market capitalization however, jumped by 0.87 percent to settle at GHS55,739.11 million.

Stock Price Movements

A total of six equities recorded changed prices. NewGold topped the advancers with price gains of GHS12.95 to end the week at GHS94.10 per share. Ecobank Ghana Ltd rose by GHS1.20 to settle at GHS 7.00 per share whereas MTN Ghana Ltd upped its share price by a pesewa to trade at 69 pesewas per share.

On the flip side, Standard Chartered Bank Ghana Ltd emerged as the worst performing stock with 13 pesewas loss to trade at GHS18.77 per share. CAL Bank Ghana Ltd and Republic Bank (Ghana) Ltd. also shed a pesewa each to end the trading week at 77 pesewas per share and 57 pesewas per share, respectively.

Currency Market

Source: Bank of Ghana 24.04.2020

On the interbank currency forex market, the Ghana Cedi appreciated against the British Pound and the Euro but was on the backfoot against the US dollar. The US Dollar surged driven by a slump in oil prices which fuelled investor’s demand for the safe haven currency. Oil prices dived into the negative territory on account of excess supply of the commodity following spill-over effects of the breakdown in negotiations between OPEC and its allies last month vis-à-vis weakened global demand. Investor’s risk appetite waned following the uncertainties in the oil market which sparked demand for the greenback. The US Dollar thus appreciated by 0.63 percent to trade at GHS5.55 on the interbank currency market. The cedi thus posted a year-to-date depreciation of 0.20 percent.

The British Pound slipped on downbeat economic data signalling an imminent recession. The Composite Purchasing Managers' Index (PMI) for April came in weaker at 12.9 from the 36.0 in March and below the estimated 31.4 whereas retail sales in April contracted to 5.1 percent lower the reading of a 4 percent in March. The contraction is attributed to the three-week extension of the lockdown in UK as part of measures geared towards controlling the spread of the novel virus spread. The British Pound thus succumbed to these developments as it depreciated by 0.56 percent to sell at GHS6.84 on the interbank currency market. The year-to-date appreciation of the cedi thus widened to 7.08 percent.

The Euro was on the backfoot as the failure of the European Union’s leaders to agree on the modalities for a coronavirus recovery package clouded the economy in uncertainties. Despite reaching a consensus on a 540-billion-euro plan that aims to support businesses in worst hit member states; members of the bloc were, however, unable to agree on the debt-sharing model for the trillion-euro rescue package. The single currency thus posted a weekly loss of 0.08 percent to sell at GHS5.99. on the interbank currency market. The year-to-date appreciation of the cedi rising to 3.66 percent.

International Markets

The US equity market ended in the red following measures adopted by some companies to ease the negative implication of the COVID-19 on their business activities. The decision by some companies to slash or suspend dividends to cope with the economic fallout from the COVID-19 outbreak, affected risk taking sentiment among investors. The S&P 500 thus posted a weekly decline of 1.32 percent to settle at an index level of 2,836.74 points. The Dow Jones Industrial Average also recorded a weekly decline of 1.93 percent to settle at 23,775.27 points.

The London Stock Exchange tumbled on account of the negative impacts of the COVID-19 on UK’s retails sector. UK’s retail sector suffered its biggest monthly drop since 1996 as it dropped by 5.1 percent in March. The FTSE 100 thus posted a week-on-week decline of 0.60 percent to settle at 5,752.23 points.

The Japanese Stock Exchange posted a weekly decline as Japan’s industrial output and retails sales are expected to sharply drop in the month of March following the COVID-19 pandemic. Industry output is expected to record its biggest decline in 7-years by 5.2 percent in March and Retail sales to worsen in 5 months to 4 .7 percent in March. The Nikkei 225 thus fell by 3.19 percent to settle at 19,262.00 points.

On the African equity market, the Johannesburg All Share Index recorded a week-on-week rise of 0.80 percent to settle at 49,527.23 points. The Nigerian All Share Index, however, registered a weekly loss of 1.41 percent to settle at 22,599.38 points. The Nairobi All Share Index also tumbled by 0.11 percent to settle at 135.78 points.

Source:www.bloomberg.com, & www.investing.com

Brent crude oil plummeted as falling global demand amid dwindling storage space crashed the market. Oil markets were pressured by supply gluts and fears of drying up in storage capacities following the decrease in global demand for oil in the wake of the coronavirus spread. Brent crude oil thus slumped by $10.04 to trade at $21.44. per barrel.

Gold dimmed its shine on the international commodities market following various stimulus programs adopted by various economies to curtail the adverse impact of the pandemic. The depreciation of the yellow metal also followed rising optimism for the development of a vaccine to subdue threat of the covid-19 pandemic on human lives and economic growth. Gold thus shed $17.20 to trade at $1,735.60. per ounce.

Cocoa made a weekly gain as reduced climatic condition in top grower Ivory Coast following lower rainfall in major growing regions in Top grower- Ivory Coast affected the supply of quality beans. Cocoa thus added $3.60 to trade at $2,341.00 per metric tonne.

Coffee sunk to a 14- year low in the week under review  following the depreciation of  the Brazilian real on heightening expectations of a 100 basis points slash in interest  rate by the central bank of Brazil to tackle it's economic fallout from the  covid-19 spread. Coffee thus weakened by 13 cents to trade at $1.05 per pound.