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Investment Market Review




A brief recovery in stocks in January was interrupted by ongoing concerns of troubling events in the banking sector in 2018 and a deteriorating cedi, pushing foreign investors away from risky assets. Investor sentiment has gradually strengthened mainly on the backdrop of a strong earnings season. Credit markets have also had a decent year, outperforming the equity market. Concerns over the trade war between the US and China has stifled global growth amid the Brexit vote and US Government shutdown.

Over the course of the month, the GSE Composite Index (GSE-CI) lost nearly 1% and the GSE Financial Index (GSE-FI) moderated by -1.2%. Consequently, the GSE-CI closed with a -3.62% year-to-date return while the GSE-FI closed with a -2.22% year-to-date return. Despite intra-month swings, corporate earnings results have begun having a positive impact on the stock market as a whole.

The central bank cut the policy rate to provide stimulus for growth. Investors were however bearish on Government bonds sighting a higher inflation outlook based on the depreciation of the cedi against major currencies and higher fuel prices. Inflation for February 2019 increased by 0.2% to 9.2%.

The cedi lost its balance in February, experiencing a depreciation of -4.34%, -5.22% and -3.37% in the dollar, pound and euro respectively. In a bid to stabilize the economy and pursue its growth agenda, the Government issued a US$3 billion Eurobond for infrastructure development and liability management. The bond which was issued in three tranches, 7 years, 12 years and 31 years was oversubscribed by over 600% with yields of 7.88%, 8.25% and 9.13% respectively. The negative economic and political backdrop in developed markets has helped drive interest in risk assets.


Ghana Stock Exchange (GSE)


Stocks Attractive for Long Term Gains

Market sentiment remained relatively low. Decliners topped advancers 2 to 1 as a total volume of more than 12 million shares and a total value of more than GH¢ 30 million changed hands in trading.

Manufacturing stocks as measured by the SAS Manufacturing Index (SAS-MI) recorded the only gain of 0.17% in February, closing with a -0.13% year-to-date return.

Banking and telecom stocks dominated trading activity however MTN Ghana moderated by -2.67% in February, shedding GH¢0.02 to close at a New Year low of GH¢0.73.

Shares of Total Petroleum Ghana Limited rose 43.75% in February alone due to impressive 2018 earnings results.  Revenue for the petroleum marketing company increased by over 28% while profit after tax increased by 46%, from GH¢32.63 million to GH¢47.64 million. The profit margin expanded from 1.76% in 2017 to 2% in 2018.

Only a handful of companies have reported 2018 earnings results so far as investors await Fan Milk Ghana and GCB Bank Limited to decide on what position to take.

Selected Market Indices. Source: GSE, SAS Research


The top price gainers last month were Total Petroleum, Access Bank Ghana, Enterprise Group Limited and Cal Bank Limited.

Agricultural Development Bank Limited announced a renounceable rights offer of 48,949,580 ordinary shares of no par value at GH¢4.76 per share. The offer is in a ratio of 1 new share for every 4.7176 existing shares held by a qualifying shareholder.  The offer was approved by the shareholders of Agricultural Development Bank Limited at its extraordinary general meeting on Thursday, December 20, 2018 and by the Securities and Exchange Commission on Tuesday, February, 26, 2019.

Market Activity Year-To-Date. Source: SAS Equities Desk

While speculation has dragged the market lower, it presents the perfect opportunity for savvy investors to profit from beaten down stocks. Significant potential can be found from stocks that are cheaply valued but have historical and potentially high prospective fundamental and investment growth rates.

Long-term-oriented investors in the stock market who hold diversified portfolios have accumulated attractive market returns historically. For example, a holding investment in the SAS Fortune Fund between 2013 and 2018 yielded a compounded annual growth rate of 23.5 percent.

Investors continue to build fixed income positions as equity market finds direction

Yields on Government securities climbed higher on bearish investor sentiment. The yield on the 91-day Treasury bill opened the year at 14.59% and closed February 2019 at 14.71%. The yield on the 1-year Treasury note increased from 19.50% at year open to 19.75% as at February ending.

Money Market Rates. Source: Bank of Ghana, SAS Fixed Income Desk


Bond Yields. Source: SAS Fixed Income Desk

Investors with short to medium term maturities profited from higher rates in similar securities compared with longer dated securities.

Investors have reallocated assets to fixed income due to downward price changes in the equities market. The trend is expected to continue to the fourth quarter as investors regain confidence in the outlook of markets.


GH¢ Exchange Rates. Source: Bank of Ghana, SAS Research

Speculation, possible fiscal slippages and an interest rate cut caused the weakening of the cedi against the major trading currencies. Headline inflation was read at 9.0 percent for January and most recently at 9.2 percent for February, 2019.


March – April Strategy

Stocks are currently trading at huge discounts to their intrinsic values due to panic selling and uncertainty from last year’s banking turmoil. This presents an opportunity for savvy investors to buy robust companies at attractive prices. Investors should however be prepared to hold their positions for at least a year for unexpected shocks from elections next year. However, analysts have forecasted the equities market will pick up in the second half of the year as banks focus on building their loan portfolios.

Even though the Government has put in place measures to control the depreciation of the cedi and curb inflation, treasury rates are expected to increase in the second half based on the perception that Government will increase spending ahead of the election. Therefore investing in short to medium term securities will help investors take advantage of higher yields in the short to medium term.

For unsophisticated investors who prefer the services of a professional money manager, investing in balanced mutual funds with higher equity weights is the most preferred choice to take advantage of possible gains in the equity market while limiting exposure through fixed income instruments.

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2018 market commentary; Turmoil in the banking sector weighed heavily on the markets



At the end of January in 2018, Bloomberg reported that the Ghana Stock Exchange Composite Index (GSE-CI) gained 19 percent in dollar terms, the most among benchmarks tracked by the company globally.

The GSE-CI did race to an all-time, record high by the end of April, but performance for the rest of the year was underwhelming. The Ghanaian stock market grew more volatile from mid-year as troubling events in the banking sector dominated headlines all year.

Both the GSE-CI and the SAS Index, another stock market benchmark, sadly gave up all the gains made in the first four months and a little bit more over the second half of the year to close the year down 0.3 percent and 1.5 percent, respectively. These two indices returned 52.7 percent and 53.4 percent, respectively in 2017.

Source: GSE, SAS Equities Desk.

Market breadth was decidedly negative for the year. Decliners topped advancers 2 to 1 as a total volume of more than 200 million shares and a total value of more than GH¢ 650 million changed hands in trading.

Source: GSE, SAS Research

Banking stocks, which had driven big market gains in 2017, declined across the board in 2018, with the GSE Financial Index, a benchmark for financial stocks, shedding 6.8 percent of its value.  

Shares of Republic Bank, which rose 85.3 percent in 2017, halved to GH¢0.69 in 2018, and Enterprise Group shares which appreciated 54.2 percent in 2017 dropped 39.5 percent in 2018 to GH¢2.24.

Fan Milk’s share price declined by 54.8 percent to close the year at GH¢8.00, as the company continued to report declining revenues and profits.

Source: GSE, SAS Research

The top price gainers were PZ Cussons, SIC, Mechanical Lloyd and Unilever.

Some investment analysts may argue that record of primary market activity during the year sucked significant liquidity out of investors’ hands, which was not available for after-market trading in the second half, resulting in the flat performance of share prices generally. The two-month initial public offering of MTN Ghana shares in the mid-year alone raised GH¢ 1.15 billion from Ghanaian and non-Ghanaian retail and institutional investors.

The market’s performance in 2018 represents a sharp correction to year-end 2017 price levels. However, for savvy investors, value and profits can still be found in the equity market. These investors will focus on searching for beaten down stocks that are cheaply valued but have historical and potentially high prospective fundamental and investment growth rates, with the hope of benefiting from a meaningful recovery in share prices.

Long-term-oriented investors in the stock market who hold diversified portfolios have accumulated attractive market returns historically. For example, a holding investment in the SAS Fortune Fund between 2013 and 2018 yielded a compounded annual growth rate of 23.5 percent.

Fixed income securities offered an attractive alternative to the volatile equity market

In the government securities market, yields hardened across the curve in the second half of the year. The yield on the 91-day Treasury bill opened the year at 13.33 percent and closed at 14.59 percent. The yield on the 2-year Treasury note increased from 17.50 percent to 19.50 percent. The yield on the 10-year Treasury note opened at 16.35 percent and the last average quote for the year was 17.50 percent.

In the first half of 2018, declining long-term rates in the market rewarded investors who had exposures to term government bonds, but this scenario reversed from mid-year as interest rates started to rise.


While fixed income offered generally higher annual yields for investors in the market in 2018, some non-bank financial institution (NBFI) issuers of fixed deposit instruments reported liquidity challenges during the year.

The Cedi weakened against the major trading currencies during the year but gained on the South African Rand and the Naira. Headline inflation was read at 10.3 percent for January and most recently at 9.3 percent for November, 2018.

Mutual funds outperformed benchmarks in 2018 due to a reallocation of assets to fixed income

Due to poor market conditions in 2018, most fund managers returned less to investors than in 2017. However, performance was above benchmark rates. Equity mutual funds, balanced funds and money market funds recorded an average return of 6.0%, 11.6% and 17.8%, respectively. The asset allocation mix of most funds was heavily weighted towards money market and fixed income securities as fund managers backed away from equities on concerns of unpredictable economic factors and uncertainty surrounding Bank of Ghana’s bank recapitalization program.

An ongoing liquidity crisis faces a number of asset management houses as a domino effect from the banking sector has caused a lock up of funds from investors. The odds of these institutions surviving this crisis will to a certain extent depend on Consolidated Bank Ghana’s ability to pay investors’ money owed.

Also, there is the likelihood of regulatory bodies increasing the minimum capital requirement of asset management firms to improve their financial position and strengthen the financial system. While an agenda like this will help the market, it poses the risk of a lot of shops closing down since the bank recapitalization showed a lack of interest from investors in the Ghanaian financial sector.

This notwithstanding, mutual funds are expected to perform positively this year 2019 on the back of lower valuations in the stock market and higher fixed income rates. Confidence in the market is expected to be restored post bank recapitalization as banks refocus efforts on expanding their loan portfolio and increasing revenue.

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