• Ghana to reinstate abolished taxes, IMF advise
• Yield on 3-year note upped by 105 basis points to 20.75 percent.
• Accra Bourse dropped further on account of significant selling pressures in MTN and SCB.
• Cedi outperformed the three major trading currencies.
• Cocoa advanced on supply cut decision.  

Macroeconomic Update

Ghana to reinstate abolished taxes, IMF advise

Ghana missed its revenue target for 2019 on the back of decline in oil prices. Government’s total revenue mobilisation for the period ending September 2019 recorded an annual growth of 9.2 percent to GHS36.3 billion, missing the projected target of GHS42.00 billion by 13.6 percent of GDP (Budget, 2020).

On account of this, the International Monetary Fund has advised Government to reinstate some of its recently abolished tax to meet the revenue shortfall while at the same time pursuing its revenue generation plans for 2020. This is expected to plug the revenue shortfall recorded in 2019 and subsequently effectively finance Government’s projects in 2020.

Among the recommendations made by the IMF are reintroduction of the 17.5 percent VAT on financial services, expanding communication services from 9 percent to 12 percent; the expansion of the national fiscal stabilization levy on all firms; the minimum chargeable income; and the reintroduction of the high-income tax rate of 35 percent.

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.

Last Friday, the yield on the 91-Day T-Bill rose by a basis point to settle at 14.70 percent. The yield on the 3-year bond recorded 105 basis point rise to settle at 20.75 percent. Interest rates on the 182-Day and 364-Day T-Bills, however, remained unchanged at 15.17 percent and 17.83 percent respectively. That on the 2-year note and 5-year bond were also unchanged at their respective yields.

Total bids raised at the auction stood at GHS2,315.39 million, representing over two hundred percent increment over the value of bids accepted by Government at the previous auction. The bids accepted also exceeded the GHS822.00 million expected to be raised by the Government at the week’s auction. Out of the total bids accepted, the 3-year bond had a share of 62.52 percent, the 91-Day T-Bill had a composition of 25.26 percent with the rest being the 182-Day T-Bills. Government’s expectation for the upcoming auction is to raise a total of GHS925.00 million from the issuance of the 91-Day, 182-Day and 364-Day T-Bills.

The term structure of the Government of Ghana treasury bills sustained its normality despite the relatively higher rate on the 2-year note over the 3-year and 5-year bonds. The general upward trend of the curve depicts normality and this stems from the continued improving macroeconomic indicators which are paramount in the assessment of the risk profile of a country for any investment activities. The normality of yield curve is expected to be sustained despite expectations of rising public expenditure in this year on various Government programmes.

Ghana Stock Exchange

At the closing bell, the Accra Bourse dropped further on account of significant selling pressure recorded in some blue-chip stocks namely; Standard Chartered Bank Ltd and MTN Ghana Ltd. The downward drive in share prices of these stocks is attributable to the aftermath effects of the banking sector clean-up which has caused investors to reduce their risk-taking levels on the bourse. The trading week ended with the benchmark Composite Index dropping by 0.52 percent to settle at an index level of 2,240.42 points, representing a year-to-date loss of 0.74 percent. The GSE Financial Stocks Index however, upped marginally by 0.02 percent to settle at an index level of 2,007.90 points, representing a year-to-date loss of 0.58 percent. 

At the close of the week’s trading activity, a total turnover of 8.43 million shares worth GHS7.84 million exchanged hands representing over three hundred percent increment over the previous week’s s outturn. MTN Ghana Ltd dominated market activities as it accounted for 95.86 percent of the overall traded volume. Market capitalization thus declined by 0.19 percent to settle at GHS56,628.09.  

Stock Price Movements

In all, four equities altered their week opening prices comprising …2 advancers and 2 laggards. CAL Bank Ltd was the best performing stock rising by 9 pesewas to trade at 99 pesewas per share. The newly listed stock – DASPHARMA also recorded a pesewa rise to close the week at 40 pesewas per share.

Standard Chartered Bank Ltd occupied the bottom of the laggard’s list, losing 40 pesewas to trade at GHS18.00 per share. MTN Ghana Ltd also dropped by a pesewa to close at 69 pesewas per share.  

Currency Market

Source: Bank of Ghana 17.01.2020

The Ghana cedi closed the interbank currency market on a bright note as it advanced against all the three major trading currencies. The US Dollar tumbled on the international currency market on account of easing trade uncertainties which muted the impact of upbeat data on the greenback. US’ retail sales data in December rose by 0.3 percent recording its third consecutive rise. Unemployment claims also dropped by 10,000 to a seasonally adjusted figure of 204,000 beating the projected 216,000 rises but failed to buoy demand for the safe-haven currency as investors opted for risky assets. The US Dollar thus posted a weekly depreciation of 0.04 percent as it reduced its sell price to GHS5.54 on the interbank forex market. The year-to-date depreciation of the cedi thus reduced to 0.01 percent.  

The British pound tumbled on account of soft inflation data which sparked investors’ fears of an imminent rate cut by the Bank of England. UK’s inflation eased to 1.3 percent in December 2019 from a previous rate of 1.5 percent, representing the weakest inflationary pressure in 3 years and below the central bank’s benchmark of 2.00 percent. The British Pound succumbed to this development as it recorded a week-on-week depreciation of 0.39 percent to sell at GHS7.21 on the interbank currency market. The year-to-date appreciation of the cedi thus rose to 1.49 percent.

The Euro lost marginally on account of mixed economic data which blurred the prospect of the eurozone. In the week under review, Eurozone’s inflation despite rising by 0.3 percent to settle at 1.3 percent in December fell below the central bank’s target of 2.0 percent. Furthermore, Germany’s economic growth came in disappointing slowing to 0.6 percent – the lowest in 6 years as a result of reduced manufacturing activities. The Euro thus depreciated by 0.15 percent to sell at GHS6.14 aiding the cedi to extend its year-to-date appreciation to 1.15 percent.  

International Markets

US equity indices climbed further on strong housing data from US economy which raised hopes of a rebound in global economic growth. US housing sector was back on track posting its biggest rise in 13 years last December to improve market sentiment. The S&P 500 index thus rose by 1.97 percent to settle at an index level of 3,329.62 points. The Dow Jones Industrial Average also finished with a week-on-week rise of 1.82 percent to settle at 29,348.10 points.

The London Stock Exchange closed the trading week in the gains, lifted by market expectation of an interest-rate cut by the Bank of England to address its economic slowdown. The FTSE 100 recorded a weekly rise of 1.14 percent to close at 7,674.56 points.

The Japanese Stock Exchange sustained its upward trajectory after the successful signing of the phase one of the trade negotiation between the US and China. This development buoyed demand for shares within the Paper & Pulp, Railway & Bus and Real Estate. The Nikkei 225 thus ended with a week-on-week gain of 0.80 percent to settle at 24,041.26 points.

On the African equity market, the Johannesburg All Share Index was lifted by the upbeat sentiment surrounding the US-China trade negotiation to post a weekly rise of 2.64 percent to settle at 59,001.87 points. The Nigerian All Share Index also recorded a week-on-week rise of 0.69 percent to settle at an index level of 29,618.52 points. The Nairobi All Share Index, however, eased by 2.99 percent to settle at an index level of 166.23 points. 

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

Brent crude oil tumbled on account of sluggish economic outturn in China and supply concerns in Saudi Arabia and Japan. China - the world’s biggest crude importer – recorded the slowest economic growth in 29 years of 6.1 percent amidst supply concerns as Saudi Arabia and Abu Dhabi had its oil production growing by 28 percent to about 9 million barrels in November 2019 to spark uncertainties on the international commodities market. Brent crude oil thus fell by 13 cents to trade at $64.85 per barrel.

Gold recorded a marginal gain on the international commodities market as the completion of the phase one of the ongoing trade deal negotiation between the US and China trimmed gains from the US dollar’s weakness. The successful signing of the trade deal with commitment to halt tariff war among these two countries cooled the long-standing trade uncertainties dimming the outlook of the yellow metal. Despite this, Gold recorded 20 cents rise to trade at $1,560.30 per ounce.

Cocoa advanced on account of statistics suggesting supply tightening from top grower – Ivory Coast. Ivory Coast recorded improving local processing of cocoa beans as its grinders processed about 143,000 tonnes of beans in 2019, up from the 137,000 tonnes performed in the previous year. This confirmed effort aimed at adhering to its supply tightening conditions set. Cocoa thus added $208.00 to trade at $2,797.00 per metric tonne.

Coffee deepened it woes on the international commodities market following the speculation that last December’s rally to a 2-year high was artificially manipulated. With the market remaining on the defensive on account of this development dropped by 7 cents to end the trading week at $1.12 per pound.

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