Ghana Market Update - Cal Asset Management Company Ltd.

Investment Climate Brief 27th - 30th Jul '20

With a gain of 1.60% in GCB, the GSE-CI and GSE-FSI posted gains of 0.08% and 0.16% respectively.
Government accepted all bids tendered to raise GHS 1,063.42m out of the GHS 1,261m it sought to raise from last week's auction.

ECONOMIC SCOOP

This follows the conclusion of the 95^th Monetary Policy Committee meeting which was held from 22^nd to 24^th July 2020.
We expect the Policy Rate to be maintained at 14.50% as the Central Bank monitors economic activity and inflationary trends following the mid-year 2020 Budget Review.

2. Minister of Finance presents mid-year budget review with focus on relief programmes and revision in macroeconomic targets

As the economic fallout of the COVID-19 pandemic continues to wear on, the Finance Ministry sought approval for supplementary funding of GHS 11.90 billion to tackle rising expenditure.
The review indicated Government’s plan to roll out a GHS 100 billion Coronavirus Alleviation & Revitalization of Enterprises Support (CARES) programme over the next 3 and half years to aid economic growth recovery.
The Government intends to start a GHS 2 billion Guarantee Scheme in order to facilitate long-term credit to businesses at affordable rates to ensure job retention, while also rolling out the National Unemployment Insurance Scheme to provide temporary income support to workers who have lost their jobs.
Real GDP growth has been revised down from 6.80% to 0.90%.
Owing to revenue underperformance and increased expenditure, the fiscal deficit has been revised from GHS 18.90 billion (4.70% of GDP) to GHS 44.10 billion (11.40% of GDP).
The Government has extended the free-water relief programme for the next three months, while free-electricity supply to lifeline consumers will run for the rest of the year.
The Communication Service Tax (CST) will be revised downward from 9% to 5% at the start of September 2020.

Gains in GCB pushed the GSE-FSI to a week-on-week return of 0.15% while losses in ETI, FML and MTNGH put a -0.62% drag on the GSE-CI.
Government fell short of its fundraising efforts as GHS 731.68m was raised out of a target amount of GHS 803m from 91 and 182-Day Bills. The 6-Year Bond issuance brought in funds of GHS 358.55m as against a target of GHS 800m.

ECONOMIC SCOOP

Inflation for June 2020 at 11.20% slightly below the May 2020 figure but remains outside the Central Bank’s target band

Year-on-year inflation rate at the end of June was 11.20%, which was 10bps lower than the May rate of 11.30%.
This was mainly driven by Food and non-alcoholic beverages inflation at 13.80%, although down from 15.10% in May.
However, Non-food inflation increased from 8.40% to 9.20%.
Imported inflation continued to fall as in recent months, closing at 4.70% in June as against 4.80% in May.
Local inflation declined from 14.10% to 13.90% over the period.

Losses in four stocks spurred declines of -0.79% and -0.32% in the GSE-CI and GSE-FSI.
Government is expected to seek long-term funding with the issuance of a new 6-Year Bond this week. Book building will commence on Wednesday 15th July 2020.

ECONOMIC SCOOP

African Sovereigns to experience long-lasting economic, financial and social threat post COVID-19 – Moody’s

International Rating Agency, Moody’s expects African countries to see a slow pace of recovery in the aftermath of the Coronavirus pandemic following border closures and broader lockdown measures which have slowed economic activities.
Another consideration was the fall in revenues from the economic slowdown, as against a rise in healthcare spending, which is expected to lead to widening fiscal deficits and increase in borrowing requirements.
Moody’s singled out countries like Mozambique, Zambia and Ghana to possibly face liquidity stress for the rest of the year, on the back of a negative outlook and elevated credit risk.

There was mixed results on the local bourse as the GSE-CI posted gain of 0.79% while the GSE-FSI suffered a decline of -0.80%.
Government raised a total of GHS 534.16m, exceeding its target amount of GHS 484.00m by 10.36%.

ECONOMIC SCOOP

IMF forecasts Sub-Saharan Africa’s economy to shrink by 3.20% in 2020

The International Monetary Fund (IMF) has revised its growth forecast for Sub-Saharan African downward from its earlier projected contraction of 1.60% to 3.20% contraction.
This new projection comes on the back of revised global economic contraction of -4.90% as a result of the economic fallout of the COVID-19 pandemic
However, the IMF expects economic growth in the region to rebound to 3.40% in 2021 following continued easing of restrictions across the region.

The two indices on the local bourse, GSE-CI and GSE-FSI, posted sharp weekly declines of -2.52% and -1.53% respectively.
Government complemented its short-term fundraising with the issuance of a 5-Year Bond.

ECONOMIC SCOOP

MTNGH seeks Judicial review of the National Communications Authority's (NCA) Significant Market Power (SMP) declaration

Subsequent to the NCA's move to initiate regulatory measures to curb MTNGH's dominance in the telecom industry, MTNGH has sought judicial interpretation of its status in the telecom industry and of the NCA's procedures.
The NCA's classification of MTNGH as an SMP is expected to limit the company's expansion and competitiveness with the aim of making the sector more competitive.
While MTNGH has welcomed the move by the NCA to manage MTNGH's dominance it is seeking legal redress against certain measures by the NCA which it deems as procedural breaches.