Equity market sustains its recovery pace as festive season draws closer
The equity market sustained recovery this week as the winning streak of the indices continued but in a snail-like manner. The Composite Index enhanced by 1.27 per cent as it settled at 1,579.12 points with a lesser year-to-date loss of 20.84 per cent. The Financial Stock Index also edged up by 2.07 per cent as it settled at 1,403.35 points with a corresponding year-to-date loss of 27.29 per cent.
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A total volume of 18.87 million shares worth GH¢3.20 million changed hands last week. Market capitalisation rebounded by 1.29 per cent to record a value of GH¢51,551.32. UT Bank accrued 90.32 per cent of the week’s traded volume to emerge as the most actively traded stock.
On price movements, the week ended with four advancers and three losers. The newly listed stock, Agricultural Development Bank, added 28 pesewas to its opening price to trade at GH¢2.93 per share. Standard Chartered Bank Ltd also appreciated by 6 pesewas to trade at GH¢8.56 per share. Ghana Oil Company Ltd and Unilever Ghana Ltd gained a pesewa each to trade at GH¢1.00 and GH¢8.51 per share respectively.
On the downside of the market, Ecobank Ghana Ltd lost 8 pesewas to trade at GH¢6.42 per share. CAL Bank and Total Petroleum Ltd also shed 1Gp and 2Gp to trade lower at 74Gp and GH¢1.01 per share respectively.
Interest rates
Government’s commitment to easing interest rate and subsequently restructuring the country’s debt portfolio is seen to be strictly adhered to despite the ongoing change in government as rates on short-term treasures continue to remain below 20 per cent.
The 91-Day treasury security settled at 16.68 per cent, down by 61 base points (bps). The 182-Day treasury also trimmed 86 bps to record a rate of return of 17.94 per cent. The 1-Year fixed note also softened by 100 bps to settle at 21.00 per cent. Yields on all other securities, however, remained unchanged.
The scheduled GH¢885 million worth of bids for last week’s auction was oversubscribed by GH¢335.71 with the government accepting an amount of GH¢1.22 billion. This week’s auction is expected to raise GH¢635 million of the 91-day and 182-day treasury securities and GH¢250 million for the 1-Year fixed note.
Performance of cedi
The local currency lost to all its major trading partners on the interbank forex market on strong seasonal demand for forex by corporate bodies and happenings in the global economy. The long expected interest rate-hike in the US boosted the outlook of the dollar against a basket of currencies.
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The unanimous increase in interest rate by the US Federal reserve from 0.5 per cent to 0.75 per cent became necessary on the backdrop of a stronger economic growth and rising employment. Owing to this development, the local currency came under pressure as it shed 1.75 per cent to record a year-to-date loss of 8.31 per cent. The cedi ended the week at a mid-rate of GH¢4.11.
Improved trade outlook in the UK resulting from a rise in export activities which reduced trade deficits and November’s 1.2 per cent growth in inflation strengthened the pound. The cedi lost 0.42 per cent last week with a corresponding year-to-date performance of 9.14 per cent to close at a mid-rate of GH¢5.10.
Enhanced economic sentiments in German held the Eurozone currency steady, as upbeat growth data pushed the rising risks from the Italian banking crisis and European elections into the background. As a result, the euro gained 0.59 per cent over the local currency trading at a mid-rate of GH¢4.29. The cedi thus recorded a year-to-date loss of 3.71 per cent.
Inflation moderates
The year-on-year inflation rate as measured by the Consumer Price Index (CPI) eased marginally by 0.3 per cent to 15.5 per cent in November. This brings the monthly change rate for November 2016 to 0.8 per cent as compared to 1.4 per cent seen for October 2016.
The decline in the general prices of goods and services acquired by households for consumption is highly attributed to lower rate of increment in prices of non-food component of the CPI. The 19.4 per cent non-food group year-on-year inflation recorded in October 2016 softened by 0.7 per cent as it recorded a rate of 18.7 per cent in November 2016.
The decline in this group was from lower rates in recreation and culture, furnishing household equipment, household utility bills, health and clothing in the month of November, compared to corresponding rates in October 2016. Food and non-alcoholic beverages inflation, however, edged up. A year-on-year inflation rate of 9.3 per cent, representing a 0.6 percentage point higher than the rate recorded in October 2016, was recorded in November.
Commodities market
Brent crude rose last week edging closer to new 17-month highs as producers showed signs of adhering to a global deal to reduce output. Brent crude gained 1.62 to trade at $55.21 per barrel as oil producers reassured their customers of their commitment to cut supplies from January amid efforts by OPEC and Russia to balance an oversupplied market.
The aftermath of the US’ Federal Reserve interest rate hike and signals of three other rate hikes in 2017 caused the yellow metal to drop to its lowest since February 2016. Gold posted a sixth straight weekly loss, falling by 2.11 per cent to trade at $1,137.40 per ounce after the Federal Reserve raised borrowing costs for the first time this year.
The hot, dry conditions in some areas of Ivory Coast ahead of the potentially damaging Harmattan seasonal wind created supply shortfalls of cocoa on the commodity market. Cocoa ended the week’s trading at $2,238.00 per metric tonnes, up by 3.13 per cent from previous week’s selling price. Improved outlook is however expected next year due to the upcoming favourable climatic conditions in Ivory Coast's main cocoa growing regions.
Coffee prices saw a technical reversal after falling to a two-week low on account of falling value of the Brazilian real. The soft-crop edged up by 2.22 per cent to trade at $1.4245 per pound as the market continued to drive support from a slowdown in the harvest in Vietnam. Quality concerns amid delays in exports caused by torrential rains in Vietnam are expected to raise the price of the soft-crop.