Low demand weakens prices of gold, cocoa

Prices of the country’s major exports – gold, cocoa and crude oil – witnessed price depreciations in the week ending July 7, mainly due to production glut.

Crude Oil, which is the newest addition to the stream of foreign exchange earners, closed lower, as the US was unable to continue with their production cut to help eliminate the global glut in supply.

Unlike before, the decision by US producers to cut output by 100,000 barrels per day, which underpinned recent rally of the commodity, was ignored in the week under review. Instead, producers increased output by an extra per cent, helping Brent crude oil to record a loss of US$1.09 to trade at US$46.83 per barrel.

This eroded investors’ confidence about whether OPEC’s agreement can be achieved.

Gold prices also weakened, as the dollar upsurged on account of upbeat economic data. The increased demand negatively affected demand for the yellow metal.

The precious metal thus became much more expensive for holders of foreign currencies; hence, reducing its demand. Gold recorded a loss of US$31.56 to trade at US$1,210.74 per ounce.  

Cocoa prices also traded lower, as threats of disease outbreak in farms of top grower – Cote d’Ivoire – created quality concerns. This reduced its demand on the commodities market.

The low demand, coupled with recent flooding of farms in Cote d’Ivoire, dampened market sentiments. The soft-crop thus lost US$69.5 to trade at US$1,870.50 per metric tonne.

Coffee, however, advanced by five cents to trade at US$1.29 on July 7. The increment was due to production cuts in top growers, Brazil and Vietnam.

FX market

The cedi staged a strong recovery against the pound and euro but weakened against the dollar in the week under review.

Weak economic data from the UK pushed the British pound on the defensive against its major peers.

This caused the cedi to gain 0.79 per cent to trade at GH¢5.62 on July 7. This brought the year-to-date depreciation of 8.15 per cent.  

The euro also closed with 0.09 per cent depreciation against the cedi after coming under pressure in the earlier trading sessions.

It traded at GH¢4.97 to bring its year-to-date depreciation to 12.03 per cent.

The dollar, however, enjoyed a chain of support from upbeat economic data to outpace its major peers on the international forex market.

The dollar gained 0.16 per cent against the cedi to trade at GH¢4.36 on July 7. This brought its year-to-date depreciation to 3.91 per cent.

Stock market

The equity market sustained its bullish outlook last week as investors continued to digest promising quarter one earnings result of some listed companies.

The week ended with the GSE composite index advancing by 1.35 per cent to settle at an index level of 1,991 points, bringing year-to-date return to 17.87 percent.

The GSE Financial Stock Index also appreciated by 1.58 per cent to 1,853.78 points, recording a year-to-date return of 19.95 percent.

Total turnover was 1.18 million shares valued at GH¢0.68 million, representing 63.24 per cent reduction from the previous week’s traded volume.

Liquidity on the bourse was mainly driven by Ecobank Transnational Incorporated and PBC Ltd.

The two accounted for 68.61 per cent of the total traded volume.

The market capitalisation, however, appreciated by 0.62 per cent to settle at GH¢59.8 million.

Price movements

On price movements, nine equities witnessed price changes with eight stocks finishing higher against a lone laggard.

On the list of advancers, Standard Chartered Bank had its stocks advancing by 78 pesewas to close at GH¢17.82 per share.

Ghana Oil Company Ltd and Fan Milk Ltd rose by 10 pesewas and  four pesewas to trade at GH¢1.97 and GH¢11.86 per share respectively. ETI and BOPP gained a pesewa each to close at 14 pesewas and GH¢4.41 per share respectively.

Enterprise Group Ltd and SIC Ltd recovered all losses, as they settled at their respective year opening prices of GH¢2.40 and 12 pesewas after gaining a pesewa each.

Treasury market

Yields on the short-dated treasury securities eased in the week under review.

The 91-Day T-Bill rate, which is now 11.67 per cent, eased by 65 bps from the previous week’s rate.

The 182-Day T-Bill also softened by two bps to settle at 13.08 per cent. Yields on the 1-year note and 2-year fixed rate note were, however, unchanged at 15 per cent and 17 per cent respectively

At the end of the auction, the government accepted GH¢877.52 million of the GH¢971.37 million bids tendered.

Out of the total bids purchased, the 91-Day and 182-Day T-Bills constituted 91.96 per cent.

The total bids accepted were, however, below the week’s target of GH¢940.00 million.

In the next auction, the government expects to raise GH¢916.00 million of the 91-Day and 182-Day treasury securities and GH¢300.00 million from the 1-year note. —GB