• MPR dropped to combat COVID-19 impact on Ghana’s economy
• Yield on 5-Yr Bond raised by 220 basis points but 91-Day T-Bill eased.
• GSE drove further southwards. 
• Ghana cedi outmuscled staged missed performance against the three major trading currencies.
• Brent crude oil halved its year opening price to drop to a 3-year low. 

Macroeconomic update

MPR dropped to combat COVID-19 impact on Ghana’s economy

The Monetary Policy Committee of the Central Bank of Ghana, in the week under review slashed the policy rate from 16 percent to 14.50 percent. This measure follows a similar trend adopted by other advanced economies to mitigate the negative effects of novel disease – COVID-19 on global economic growth. Heightened uncertainty across the global financial markets, sharp downturn of global stock prices and steep rise in sovereign bonds spreads in emerging markets are said to have influenced the rate cut decision. On the domestic front, the dampened global demand which is affecting Ghana’s crude oil export earnings and tax revenues as well as the export restriction from advanced economies were cited as factors likely to affect Ghana’s growth leading to a GDP growth of 5.0 percent in the baseline scenario but halved to 2.5 percent in the worst case. Presented below is the trend analysis of the 1-year trend analysis of the MPR:

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.

The interest rates on the Government of Ghana treasury bills witnessed marginal moderation in the week under review. The yield on the 91-Day T-Bill dropped by a basis points to settle at 14.75 percent. The interest rates on the 182-Day and 364-Day T-Bills were however unchanged at 15.18 and 17.80 percent respectively. The 5-year bond which was auctioned in the week under review for both domestic and foreign investors had the yield raised by 220 basis points to 21.70 percent. The yield on other Government of Ghana treasury bonds and notes were, however, unchanged as they were not scheduled for the week’s auction. 

An amount of GHS682.83 million worth of bids was accepted by Government at the week’s auction after accepting all the bids tendered by investors. The GHS754.00 million target was missed and also fell below the GHS889.68 million raised at the previous week’s auction. An amount of GHS458.53 million was also raised from the sale of the 5-Year Bond bringing total bids accepted to GHS1,141.36 million. Out of the GHS1.14 billion worth of bids raised by the Government, the 91-Day T-Bill dominated with a share of 51.93 percent. A total of GHS715.00million is targeted for the next week’s auction from the issuance of the 91-Day,182-Day and 364-Day T-Bills. 

The yield curve sustained its normality but with marginal moderations on the short-dated treasury securities. We foresee interest rates on the GoG treasury securities rising marginally in the coming weeks following the heightened uncertainties surrounding the outbreak of the COVID-19 in Ghana and the subsequent reduction in risk taking sentiment, amidst an expectation of rising Government borrowing, to combat the disease spread.

Ghana Stock Exchange

At the close of the week’s trading activities, the Ghana Stock Exchange drove further southward as global financial and stock markets subdued to the fast spreading of the COVID-19. The astronomical rise in new cases of the COVID-19 disease damped investors risk taking sentiment dragging the market indices further downwards. The GSE Composite Index thus shed 31 basis points to settle at an index level of 2,179.02 points representing a year-to-date loss of 3.46 percent. The GSE Financial Stocks Index also went down by 46 basis points to close at 1,952.16 points, corresponding to a year-to-date loss of 3.34 percent.

Market outturns were significantly much lower than recorded at the previous week’s trading session. A total of 1.43 million stocks worth GHS767,271.87 were exchange at the week’s trading as compared to the 2.12 million shares valued at GHS1.64 million, which exchanged hands at the previous trading session. MTN Ghana Ltd led the activity chart with 60.08 percent share of the total traded shares for the week. Market capitalization also nosedived by 0.13 percent on account of the bearish sentiment to settle at GHS56,186.91 million.

Stock Price Movements

In all, 9 equities altered their week opening prices with 3 equities having their share prices rising and the remaining 6 equities shedding their share values. On the bulls list, Société Générale Ghana Ltd topped with a price uptick of 3 pesewas to trade at 76 per share. Enterprise Group Ltd followed suit with price appreciation of 2 pesewa as it ended the week’s trade at GHS1.60 per share. Camelot Ghana Ltd also joined the advancers with a pesewa gain to trade at GHS1.60 per share.  

On the flip side of the Bourse, NewGold Ltd recorded the worst price decline of GHS3.35 pesewas as it trimmed its share price to GHS81.15 pesewas. Access Bank Ghana Ltd and CAL Bank Ltd went down by 10 pesewas and 7 pesewas as it settled at GHS4.40 and 83 pesewas per share respectively. Ghana Oil Company Ltd and GCB Bank Ltd dropped their share prices by 5 pesewas and 3 pesewas to end the week at GHS1.70 and GHS4.76 respectively. Ecobank Ghana Ltd also shed 2 pesewas to trade at GH7.26 per share.

Currency Market

Source: Bank of Ghana 20.03.2020

On the interbank currency market, the Ghana Cedi sustained its gains against the British pound and the Euro but weakened versus the US Dollar. The US Dollar rose to a 3-and-half year high as fears of coronavirus pandemic sparked demand for the greenback amid economic interventions by the US government to mitigate the potential impact on the US economy. The US Fed cut its benchmark federal funds rate by 100 basis points to 0- 0.25 percent and rolled out a $700 billion quantitative easing program to spur economic activities in the wake of the novel virus. In addition to this, the US Government proposed a $1 trillion economic stimulus plan to deliver critical aid to US businesses. These factors coupled with investors flight to safety resulted in the US Dollar thus rising by 0.61 to sell at GHS5.36 on the interbank currency market. The year-to-date appreciation of the cedi thus reduced to 3.24 percent.

The British pound nosedived on account of heightened investors’ worries over the coronavirus pandemic on UK’s economy. Interventions by the Bank of England as it slashed its interest rates for the second time from 0.25 percent to 0.1 percent  and  launched a £200 billion asset buying program to avert a possible slowdown was however, unable to spark a turnaround in the pound as the adverse effect of the virus on economic activities was alarming. The pound thus posted a weekly loss of 5.24 percent to sell at GHS6.33 on the interbank currency market. The year-to-date appreciation of the cedi thus widened to 15.68 percent.

The Euro was on the defensive as investors’ fear of a recession following rising cases of the coronavirus in the bloc weighed on its demand. A surge in cases recorded in some economies such as Germany, Spain and Italy with the former surpassing China damped market sentiment to affect the single currency. On the back of this, the European Central Bank launched a 750 billion-euro ($810 billion) debt-buying program and reduction in interest rates to 0.50 percent to stimulate the economy. Nevertheless, the Euro recorded a week-on week loss of 2.87 percent to exchange at GHS5.75 on the interbank currency market. The year-to-date appreciation of the cedi thus upped to 5.75 percent.

International Markets

Global equity markets tumbled as investors engulfed in selling pressure following lockdown initiatives adopted by most economies to contain the spread of the COVID-19 novel virus. Investors embraced the fact that global economic activities have come to a halt following the fast spread of the coronavirus which drove most equity indices into the negative.

On the US equity market stocks within the Utilities, Telecom and Consumer Goods sectors witnessed heavy sell-off with the S&P 500 Index recording a week-on-week decline of 14.98 percent to settle at 2,304.92 points. The Dow Jones Industrial Average Index also posted a weekly decline of 17.30 percent to close at 19,173.98 points.

The London Stock Exchange also registered a week-on-week decline of 3.27 percent on account of coronavirus fears to settle at 5,190.78 points. The Asian stock market also witnessed similar downtrend with the Nikkei 225 dropping by 5.04 percent to settle at an index level of 16,552.83 points.

The African equity market saw the Johannesburg All Share Index falling by 8.84 percent to close at 40,272.00 points. The Nigerian All Share Index also eased by 2.36 to settle at 22,198.43 points. The Nairobi All Share Index similarly posted a weekly loss of 0.55 percent to settle at 132.93 points.

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

Brent crude oil dropped to its lowest in more-than three years on the international commodity market as it sold below $30.00 per barrel. This development was spurred by the demand disruption created by the COVID-19 as the lockdown impose in some countries as means of fighting against the disease spread reduced demand. The travelling restrictions and movements in economies such as China, Italy and the recent lockdown of some states in the US amidst the price war between the Saudi Arabia and Russia weighed on the commodity in the week under review.  Brent crude oil thus fell by $6.87 to close at $26.98, representing a year-to-date loss of 59.12 percent.

Gold ended the trading week in the red despite the ill-sentiment which has engulfed the global market. The indiscriminate selling of the yellow metal as means of having liquidity to withstand the lockdown imposition by most countries resulted in the down pricing of the commodity. Gold thus fell by $32.10 to trade at $1,484.60 per ounce.

Cocoa trimmed its value on the international commodities market on the back of export restriction imposed by the hard-hit COVID-19 countries and the projection of abundant supply in the next crop season in Ivory Coast as signs of favourable climatic conditions returns. Cocoa thus shed $252.00 to close at $2,230.00 per metric tonne.

Coffee advanced as market fears about the potential disruptions to the supply chain due to the coronavirus outbreak could create occasional shortages. Coffee thus added 13 cents to trade at $1.20 per pound.   

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