NPLs ratio expected to increase in coming months
The ratio of Non-Performing Bank loans (NPLs) is expected to increase in the coming months, according to the latest financial markets review by the UMB stockbrokers.
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It said that was due to the sluggish growth in advanced economies, slowdown in major emerging markets and increasing private sector debts, together with continuing financial needs of emerging economies.
The report believed these would impede global growth in the months ahead and said it was against this background that the World Bank had revised downward its 2016 global growth forecast from 2.9 per cent to 2.4 per cent.
It said other potential risks expected to derail global growth included the ripple effects of the Chinese economic downturn, the uncertainty regarding Federal Monetary Policy and the increasing corporate debt of emerging economies.
Others included the Eurozone growth recession on the back of surging oil prices and pressure on bank profits when the zero bond is reached, as well as the heightening geopolitical risk in Eastern Ukraine, Russia and Syria.
Stock market and market outlook
The report further stated that the prevailing conditions had negative effects on the stock market as the year to year date yield of the bourse drifted downwards.
It said many investors sought safe havens in government securities and fixed deposits due to attractive rates being offered on the money market.
“This saw shareholders exiting their positions in shares, resulting in selling pressure in a number of blue chip equities and heavily capitalised stocks, which weighed on their prices. Key among them were Total Petroleum, UT Bank and Standard Chartered Bank,” the report stated.
“A significant change in trading activity and market trends is thus not anticipated as this development will continue in the coming few months,” it added.
This notwithstanding, demand in stocks such as Ecobank Transnational Incorporated, Fan Milk and Mechanical Lloyd ensured their prices were lifted during the month under review.
Domestic economy
According to the report, the positive impact of a more stable energy supply and increased contribution from oil and gas and agricultural industries may see the country’s real domestic product (GDP) growth rebounding in the month ahead.
It said it expected energy supply to improve significantly following emergency measures including the use of power barges, with positive ripples on the manufacturing and overall business environment.
It further added that the medium-term growth prospect for the economy also remained positive as fiscal adjustment and consolidation under the IMF programme seemed to be yielding positive results.
Support from other development partners such as Germany and the recent US$ 704,815 grant by the United States Trade and Development Agency (USTDA) to assist power generation are also expected to increase economic activities.
“We anticipate volatility on the currency market as the slide in global commodity prices such as oil, gold and cocoa weighs on the country’s forex earnings and puts pressure on the national budget. Also, a possible rate hike by the US Feds will cause the cedi to tumble on the forex market.”