Investment brokers have predicted a rebound in trading on the domestic bourse at least by the end of the year.
It follows concerns over a sluggish performance of some stocks on the Ghana Stock Exchange for some time now.
“If you look at all the fundamentals you would realize that most of the shares are trading at a very good Price Earnings Ratio (PER) and for most of the equities that you note over there, the share prices are not a true reflection of their values…
There are intrinsic values so for proper investors looking at the long term and have foresight, this is the time to invest,” the Executive Director of CDH Asset Management, Seth Aryitey intimated to Citi Business News.
Government’s increased borrowing from the domestic market is said to have affected the performance of the Ghana Stock Exchange as the banks are inclined to investing in government bonds than provide credit to the private sector.
The issuance calendar released by the Ministry of Finance indicated that government intends to borrow an aggregate amount of about 31 billion cedis for the first half of 2016.
The latest issue it announced was a five year cedi denominated bond which it received about 800 million cedis at a yield of 24.5 percent.
Economist Dr. Ebo Turkson says the development poses a risk to the growth of the private sector to as they will be crowded out from access to credit which will be expensive as a result.
“Because Treasury bills are going to be offered at higher interest rates, credit available to investors in the economy will go to government, because banks will be inclined to lend to government rather than the private sector.
Not only will those resources go to government, the resources that are left for the private sector to borrow will have to be borrowed at a high interest rate.
And when that happens, we say the private sector is being crowded out of the credit market,” he said. Meanwhile Seth Aryitey believes the retarding performance of the bourse could also be attributed to the increased preference for short term investments compared to long term ones by investors. “Another thing in my view is that as a nation we are too much short term sighted but we must be considering looking into the long term,” he stressed.
2016 bonds issued so far
On January 7, 2016, government received 426.23 million cedis out of the 500 million cedis bond it issued to restructure its debt and maturity settlement.
Also in January, Ghana paid 24.75 percent yield on a three-year bond arranged by book-builders. In April, Ghana accepted 1.123 billion cedis (294 millon dollars) for a three-year domestic bond with a yield of 24.5 percent.
Proceeds of the bond, which was open to offshore investors, will be used to finance the government’s 2016 budget.
It was sold through a book-builder’s system arranged by Barclays Bank, Stanbic and Strategic African Securities.
Total bids received amounted to 1.13 billion cedis with 71 percent of that coming from offshore investors. Moreover on May, 26, 2016, government was able to raise GH¢341 million but accepted only GH¢303 million after it published a five year 500 million cedi bond.
Also, the Bank of Ghana announced on June, 21 2016, that, it will raise an undetermined fund through the issuance of a five year domestic bond.
Government subsequently accepted 811.04 million cedis ($208 million) at a yield of 24.5 percent, slightly lower than the yield at the previous issue, the Bank of Ghana announced.