Investors had an active week in Ghana’s financial markets, with notable performances in both the stock and fixed-income sectors. The Ghana Stock Exchange (GSE) posted steady gains in its Composite Index, while Treasury Bills and repos dominated activity in the fixed-income market. These trends highlight the market’s resilience and the continued demand for both equity and debt investments.
Equity Market: Strong Performance Drives Investor Confidence
The Ghana Stock Exchange (GSE) maintained its upward momentum last week, with the GSE Composite Index (GSE-CI) rising by 31.99 points to close at 4,648.16 on Thursday, November 14, 2024. This represents a year-to-date growth of 48.49%, signaling sustained investor confidence in the equities market. Market capitalization followed suit, growing to GH₵104.07 billion by the end of the week.
Non-financial equities led the gains, with consistent growth throughout the week. Trading volumes peaked at 708,324 shares on Monday, November 11, while Thursday saw the lowest activity, with 31,870 shares traded. The GSE Financial Stocks Index (GSE-FSI), however, remained flat at 2,301.50, reflecting a stable yet subdued performance in the financial sector. Despite this, its year-to-date growth of 21.03% underscores its resilience amid broader market fluctuations.
The fixed-income market saw strong demand for Treasury Bills last week, driven by investor preference for short-term, low-risk securities. Total trading volumes peaked at 880.24 million units on Monday, November 11, with Treasury Bills accounting for 520.29 million units of the activity.
By Tuesday, November 12, trading volumes dipped to 561.10 million units, led by 457.31 million units of Treasury Bills traded. Activity rebounded on Thursday, November 14, with 563.38 million units traded, including 374.57 million units of Treasury Bills and 188.81 million units of Government of Ghana (GOG) Notes and Bonds.
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Rising yields were a key trend in the fixed-income market. The weighted average interest rate for the 91-day Treasury Bill rose to 26.97%, while the 182-day and 364-day tenors climbed to 27.88% and 29.22%, respectively. These increases reflect tightening liquidity conditions and growing investor demand for higher returns, especially on longer-dated securities.
The repo market also recorded significant activity, peaking at 2.88 billion units on Thursday. This reflects strong liquidity needs among financial institutions, aligning with broader market trends favoring short-term instruments.
Government Borrowing: Missed Target Amid Rising Costs
The Government of Ghana faced challenges in meeting its borrowing target this week, raising GHS 5.18 billion out of a planned GHS 6.23 billion in Tender 1929 held on November 15. This marked a shortfall of GHS 1.05 billion, despite strong demand for the 91-day Treasury Bill, which raised GHS 3.94 billion.
The missed target highlights growing pressures on the government to finance its operations amid rising borrowing costs. Weighted average interest rates for the week increased across all tenors, with the 364-day bill reaching 29.22%. This is a notable rise from previous weeks, reflecting increased risk premiums demanded by investors as market conditions tighten.
Looking ahead, the government has set an ambitious target of GHS 6.89 billion for the upcoming auction, signaling its intent to address funding shortfalls. However, the rising cost of borrowing presents a challenge, as higher yields may strain debt servicing commitments.
Exchange Rates, Inflation, and Policy Rate Trends
Meanwhile, as of November 16, 2024, the exchange rate for the Ghanaian cedi stands at GHS 14.59 to 1 USD on the official market, with rates for the euro and the pound at GHS 15.99 and GHS 18.23, respectively.
In contrast, the informal market quotes slightly higher rates, with the dollar trading at GHS 16.50, the euro at GHS 17.60, and the pound at GHS 21.00, reflecting increased demand for foreign currency in informal channels.
Inflation remains high at 22.1% year-on-year for October 2024, driven by rising food and fuel costs. The Bank of Ghana has maintained the policy rate at 27% to curb inflation and stabilize the cedi, though this has kept borrowing costs elevated.
Ghana’s financial markets presented a mixed picture this week, with a strong performance in the equity market offset by challenges in the fixed-income space. The GSE’s nearly 50% year-to-date growth underscores its attractiveness, while Treasury Bills continue to offer appealing returns for risk-averse investors. However, the government’s missed borrowing target and rising interest rates point to growing fiscal pressures.
For investors, the equities market offers growth opportunities, while the fixed-income market presents attractive short-term yields. As the government faces rising borrowing costs, its strategies in the coming weeks will be critical in shaping the broader market’s trajectory.
