• Producer Price Inflation dropped to 6.7 percent in May.
• GSE witnessed a turnaround, supported by price appreciation in some financial stocks.
• Yields on short-dated treasury securities eased.
• Cedi depreciated against all three major trading currencies.
• Cocoa dropped despite the price flooring measures adopted by two top-growers. 

Macroeconomic Update

Producer Price Inflation dropped to 6.7 percent in May

In the month of May 2019, average input cost of production in the domestic economy witnessed a decline. This followed significant development in the manufacturing sub-sector which is the largest sub-sector within the production space, having its input cost recording the lowest inflation rate. At the close of May, the Producer Price Inflation (PPI) at the manufacturing sub-sector dropped by 1.3 percentage points from 7.5 percent in April to settle at 6.2 percent. The PPI for the other two sub-sectors however, saw some increments with the rate for the mining and quarrying sub-sector rising by 2.8 percentage points to 15.1 percent in May whereas that of the utilities sub-sector increased by 0.1 percentage point over April’s value to settle at 1.1 percent in May. Presented below is a 1-year trend movements of the PPI;

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.

Interest rates on the Government of Ghana treasury securities eased marginally with the yield on the 91-Day T-Bill declining by 3 basis points to settle at 14.74 points. The yield on the 182-Day T-Bill also trimmed 3 basis points to settle at 15.20 percent. Interest rate on the 364-Day T-Bill however, remained unchanged at 17.92 percent. The yield on the treasury notes and bonds also remained the same as they were not scheduled for auction.

A total of GHS890.90 million bids were accepted by the Government, out of the GHS914.97 million tendered by investors. This exceeded the week’s target of GHS875.00 million and the GHS741.57 million raised by Government in the previous week’s auction. The 364-Day T-Bill dominated Government’s purchase constituting 53.24 percent of the overall accepted bid. An amount of GHS1,040.00 million is expected to raise by the Government of Ghana at the next auction.

The yield curve as expected sustained its normality and we still expect this to run through the rest of the year but with marginal reduction in yields as investors continue to show confidence in the macroeconomy while policy makers adopt strategies to stimulate economic activities. 

Ghana Stock Exchange

Trading activities on the Accra Bourse witnessed a turnaround following improved demand for some financial stocks. The upturn followed rising investors’ confidence associated with dividend payments by GOIL and the expected payouts by EGL and SCB in the coming weeks as well as expectation for upbeat 2nd quarter earnings result. On the back of this, the market indices upturned with the GSE Composite Index rising by 46 basis points to settle at 2,394.82 points. This corresponds to a year-to-date loss of 6.90 percent. The GSE Financial Stocks Index also surged by 173 basis points to settle at 2,089.99 points, representing a year-to-date loss of 2.96 percent.

The week’s trading recorded a total of 4.76 million shares valued at GHS5.26 million exchanging hands, as compared to the 0.66 million shares worth GHS1.50 traded in the previous week. MTN Ghana Ltd led the activity chart, accounting for 58.71 percent of the overall traded volume. Market capitalization also rose by 0.53 percent to settle at GHS58,729.64 million.

Stock Price Movements

At the closing bell, a total of thirteen equities altered their week opening prices; six advancers against seven laggards. Ecobank Ghana Ltd was the highest price gainer, rising by 67 pesewas to trade at GHS8.49 per share. Access Bank (Ghana) Ltd followed suit with price appreciation of 40 pesewas to close at GHS3.40 per share. CAL Bank Ltd and Société Générale Ghana Ltd had their share prices upped by 11 pesewas and 3 pesewas to close the week’s trade at GHS1.04 and 75 pesewas per share respectively. Other gainers were MTN Ghana Ltd and Ecobank Transnational Incorporated.  

Standard Chartered Bank Ltd was the worst performing stock as it lost GHS1.48 pesewas to trade at GHS19.02 per share. Fan Milk Ltd also witnessed a significant loss of GHS1.50 to close the week at GHS5.00 per share. GCB Bank Ltd and Total Petroleum Ltd trimmed their week opening prices by 7 pesewas and 20 pesewas to trade at GHS4.00 and GHS4.93 per share respectively. Enterprise Group Ltd and Starwin Products Ltd tumbled by 5 pesewas and 2 pesewas to finish the week’s trade at lower values of GHS2.10 and 2 pesewas per share. Intravenous Infusion Ltd also had its share price trimmed by a pesewa to close at 7 pesewas per share.  

Currency Market

Source: Bank of Ghana 28.06.19

Trading on the interbank currency market ended with the Ghana cedi losing ground against all the three major trading currencies. The US dollar posted a recovery on the international currency market as recent commentary by the US Fed to scale back the aggressive interest rate cut in the coming month eased investors’ fears. The pullback was on account of the release of the final GDP for the 1^st quarter of 2019 at 3.1 percent and decision to ease traders’ concerns. Also, hawkish commentary from US Treasury Secretary – Steven Mnuchin on the US-China trade negotiation talk citing an imminent trade truce lifted market sentiment to boost demand for the US dollar. The dollar thus gained a pesewa to trade at GHS5.26, representing an appreciation of 0.13 percent against the cedi. The year-to-date depreciation of the cedi thus stood at 8.35 percent.

The Euro closed the trading week bullish to record its best weekly performance in 17 months. Recent economic stimuli policy adopted by the Bank of England and plans to reduce interest rate to mitigate the adverse impact of the trade tariff war whilst revamping economic activities supported the single currency. Eurozone’s inflation also contributed to the weekly gain of single currency as core inflation which is a key determinant in most monetary policy reviews witnessed a hike in the month of June. Despite overall inflation aligning with market expectation at 1.2 percent in June, Eurozone’s core inflation jumped from 0.8 percent in May to 1.1 percent in June. The Euro thus upped by 3 pesewas to sell at GHS5.99 on the interbank currency market. The year-to-date depreciation of the cedi thus widened to 7.86 percent.

The British pound dropped to a 5-month low on the international currency market due to risk averse syndrome exhibited by many investors ahead of the upcoming election to replace Theresa May. Investors fret about the possibility of a no-deal Brexit in the event of a win for Boris Johnson slowed market activities and weighed on the pound sterling even after 1^st quarter GDP was confirmed at 0.5 percent. Despite the pound lost on the international currency market, it appreciated by 0.04 percent to trade at GHS6.68 on the interbank currency market. The year-to-date depreciation of the cedi/pound thus stood at 7.60 percent.

Ecowas to adopt the ECO by 2020

After a thirty-year talk, the Economic Community of West African States last Saturday gave the green light for the usage of a single currency throughout its member states. This initiative is projected to improve and deepen economic activities and regional trade among the 15 member states with a population of about 385 million. The programme is expected to kick-start in 2020 after January’s deadline following a successful converging of macroeconomic variables for a smooth take-off. The currency market of the ECOWAS economies is expected to post robust performances as central banks and governments adopt all necessary policies.

International Markets

US Stocks despite posting an overall impressive gain for the month of June and for the second quarter ended the trading week in the red. This followed lower trading activities as investors reduced risking taking ahead of the recently held G-20 summit where Trump was expected to address trade dispute with its Chinese counterpart. The S&P 500 thus ended with a weekly loss of 0.29 percent to settle at 2,941.76 points. The Dow Jones Industrial Average similarly recorded a weekly loss of 0.45 percent to settle at 26,599.96 points.

The London Stock Exchange closed on a positive note as investors hoped that the long-due trade tension would cease after the G-20 summit. This coupled with various measures to drive global economic growth sparked positives sentiment to lift the FTSE 100 up by 0.24 percent as it settled at 7,425.63 points.

The Japanese Stock Exchange climbed further as rising expectation for interest rate cut by some advanced economies geared at stimulating growth added to investors optimism about an imminent redress of the trade tariff war. The Nikkei 225 thus saw 0.08 percent weekly appreciation to settle at 21,275.92 points.

On the African equity market, the Nigerian All Share Index recovered 0.39 percent of its recent loss to end the trading week at 29,96.87 points. The Nairobi All Share Index also upturned with a weekly gain of 1.53 percent to close at 149.61 points. The Johannesburg All Share Index, on the other hand, shed 1.25 percent to close at 58,203.84 points.

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

Brent crude oil posted a marginal gain on the international commodities market on hopes that the long-trade tariff war between the US and China could end soon coupled with OPEC and its allies agreeing to extend the production cut deadline. Brent crude oil thus added 60 cents to close the trading week at $65.80 per barrel.

Gold ended the trading week with gains as the wait-and-see syndrome which surrounded the ongoing G-20 summit sparked investors demand more for safe-haven assets. The meeting which is expected to address the trade uncertainties and other vital agenda lifted the value of Gold by $18.15 to close at $1,414.35 per ounce.

Cocoa dropped further despite a team-up plan by the top producers – Ivory Coast and Ghana to set a floor pricing of the soft crop. The inability of the soft crop to post gains stemmed from uncontrolled volumes of production as these countries experienced favourable climatic conditions. Cocoa thus lost $63.50 to trade at $2,436.50 per metric tonne.

Coffee climbed further, rising to its highest in three weeks, on the back of speculative buying activities among investors. The report of a decline in supply of the soft crop from top growers – Vietnam and Brazil propelled the gains recorded in the week under review. Coffee added 8 cents to trade at 1.08 per pound.  

Note: The data in this publication is Friday on Friday (w/w)