Tuesday, April 29, 2014

African Capital Markets - The Potentials & The Lost Opportunities.

Guest Post by:
BOAKYE OGYEM EMMANUEL. ( 0261528542 / ogyemb@yahoo.com)
A few days ago, I decided to research Africa’s capital markets, and to my astonishment I realized that most of these markets were very resilient to exchange rate fluctuations and the debilitating effect of inflation. These findings fascinated my imagination and re-oriented my negative stereotypical perception about Africa’s capital markets. However my greatest disbelieve dawn on me when I realized that the GHANA STOCK EXCHANGE (GSE COMPOSITE INDEX) far out-performed the S&P 500 of the UNITED STATE OF AMERICA in terms of dollar adjusted returns within the years of 1992-2013, this means that passive investors in Ghana within the aforementioned years were better off than their counterparts in the united States. The research choose 1992 as the base year solely due to two reasons, firstly it was the year Ghana declared democratic rule and entered into the 4threpublic, making its capital market attractive to foreign investors. Secondly, it marks the start of the longest bull market in the history of the United States, which spanned for almost 7yrs, between the years of 1992-1999. The Ghana stock exchange in the mist of significant macro-economic pressures such as ,an annual compounded cedi depreciation rate of 18.54%, unwarranted high levels of inflation in the 90’s and a sluggish economic growth amid lackluster energy sector , surmounted to become more profitable than the S&P 500. Now let’s move on to the number crunching that reinforce these assertions, in 1992 the GSE all shares Index traded with a value of 62.17, by the end of the year 2013 the value of the GSE COMPOSITE INDEX was 2,145.20 after adjusting the Composite index to the ALL SHARES INDEX which was previously used by market participants until 2010,we arrived at a value of 16313.66 for year 2013. This value reflects an annualized return of 28.90% for all investors who had invested during the aforementioned investment horizon. One may ask how do these numbers translate into millions of cedis for the average Ghanaian who had invested in the GSE within the 1990’s? the answer will be an enormous amount of wealth, if an investor had invested a sum of GH₵1000 on the exchange within the year 1992 he/she would have pocketed a whooping sum of GH₵266,418.3791 (the equivalent of 2.6 billion old Ghana cedi’s) by the end of 2013 , not convinced? then add a zero to the initial amount invested , that is if an individual had invested an amount of GH₵10,000 in 1992 for his kid or dream house , that individual would have now pocked almost GH₵2.66million new Ghana cedi (the equivalent of 26 billion old Ghana ), yes!!! The individual would have been a millionaire due to the power of compounding, and the resilience of a stock exchange that has triumph against the overwhelming odds of high inflation and significant exchange rate fluctuations. One amazing discovery is that many Ghanaians during this same period gave far more money needed to invest and achieve these sterling results to dubious connection men, in other to seek greener pastures outside the country. However, the returns from the exchange indicates that those who stayed behind and placed their bet on the stock exchange are now better off and perhaps “millionaires” relative to their foes who went outside for greener pastures. As a value oriented investor I deemed it necessary to determine if there existed significant value in stocks trading outside my home land , due to this I decided to compare the results of the GSE to the US dollar and the S&P 500 index. Thorough data gathered from renowned investment sites (CNN MONEY, BLOOMBERG DATA etc.) indicates that the S&P 500 started with a value of 262.79 in 1992 as at 31st December 2013, the index was trading at a value of 1813.036; this represents an annualized value of 9.1759% on a compounded basis. That means that if an investor had invested $1000 in the S&P 500 for the 22yrs period he/she would have pocketed an amount of $6,897.79 for year-end 2013. In order to reasonably compare these exchanges a dollar adjusted return for the GSE Composite index was computed to be an annualized 10.35% for the same investment horizon. However the S&P’S annualized gain was 9.1759%. Data used for the dollar adjusted return was acquired from Dr. Mahamadu Bawumia’s speech titled “RESTORING THE VALUE OF THE CEDI”. According to the article the cedi value against the US dollar during 1992 was at GH₵0.05208 (the equivalent of ₵520 old Ghanaian cedi), as at 2013 the value of the cedi was GH₵2.20 (the equivalent of ₵22,000 old Ghana cedi). This represents an annualized compounded depreciation rate of 18.55% which lags against the GSE index’s sterling performance. Finally, from the research it’s apparent that the GSE (GHANA STOCK EXCHANGE) has shown its superiority amid a turbulent exchange rate fluctuations, economic sluggishness and unabated inflationary pressures , to emerge as the best investment entity for the long term. Furthermore, it’s strategically positioned than ever before to produce sterling performance going forward, this can partly be attributed to increase positive inflow of FDI, strong economic growth fundamentals, stable political climate and copious oil /natural gas reserves. With all these positive factors looming in the long run, I think we should all start investing into the future to realize our unlimited gains in the stock market.

Sunday, April 27, 2014

New Kid on GSE - Mega African Capital Ltd Listed.

Just so you don't know:
Mega African Capital Limited (“MAC”) announced that it has allotted 1,333,334 ordinary shares of GHS 3.00 each in the capital of MAC (“Shares”), which rank pari passu with the existing 7,308,135 ordinary shares in issue, pursuant to the offer for subscription of up to 1,333,334 (the “Offer”) in connection with MAC’s listing on the Ghana Stock Exchange  (“GSE”). This is the first ever listing of a Company which invests in equities across Africa and the real estate sector in Ghana. IC Securities (Ghana) Limited was engaged by MAC as Financial Advisor and Sponsoring Broker on this landmark Transaction

The Offer was opened between 10 March and 28 March 2014 with 1,333,334 shares offered at GHS 3.00 per share. During this period, 30 valid applications were received for 1,333,334 Shares representing a total amount of GHS 4,000,002. The listing and the first day of trading of Shares on the GSE was on 23 April 2014.

Comment by Mr. Kwesi Amonoo-Neizer, Managing Director,:
“I am delighted by the success of our offer; this is the first Company that

Thursday, April 17, 2014

Prospectus for the Issue of Ghc 400 million Government of Ghana 3-year Fixed Rate Bond

NOTICE NO. BG/TD/2014 /17
Further to the Bank of Ghana Notice No.: BG/TD/2014/01 on the Issuance Calendar for Government of Ghana securities for the half-year period, 1st January – 30th June, 2014, the Bank of Ghana invites bids for the issue of the above instrument on behalf of the Government of Ghana through the Auction process. The instrument will be Ghana cedi-denominated and will be issued at par. It shall bear a coupon rate equal to the highest competitive bid accepted at the auction for the security. The coupon rate so fixed shall carry throughout the term of the security.

Issuer: Government of Ghana
Purpose: Government Financing Requirement
Amount: GH¢400 million
Issue Method: Through an auction to be held on 24th April, 2014
Price: The instrument shall be issued at par.
Denomination: Each Bond shall have a face value of one Ghana cedi.
Minimum Bid: GH¢50,000 and multiples of GH¢1,000 thereafter.
Coupon: To be determined at the auction to be held on 24th
April, 2014, as described under (1) above.
Interest Payment: Semi-annually from the Issue Date, in October and April.
The amount of interest paid on every coupon payment
date shall be equal to the principal amount at the
coupon rate for half-year.

Withholding Tax:
The Internal Revenue Act 2000 requires the Bank to withhold tax in respect of interest payments to resident corporations holding Bonds on their own account at the rate of 10% of the gross amount of the payment.
Interest paid to a non-resident holder (individual and institution) on Bonds issued by the Government of
Ghana is exempt from tax.
Application Methods: Bids may be made on either a competitive or noncompetitive basis through Primary Dealers only. Primary Dealers may also submit bids on their own behalf. Bids received will not be revocable.
Participation: The 3-year Fixed Rate Bond shall be available to both resident and non-resident investors.
Closing Date: Bids must be electronically delivered to the Central Securities Depository Auction Module not later than 1.30pm on Thursday, 24th April, 2014.
Allocation of Bonds: The Bank of Ghana reserves the right to reject any or part of any competitive or non-competitive bid. Subject to this, competitive bids will be ranked in ascending order of the annual rate of interest bid. Securities will be sold to applicants whose competitive bids are at or below the highest rate at which the Bank of Ghana decides that any competitive bid would be accepted (the "uniform allocation rate"). Applicants whose competitive bids are accepted will purchase securities at par with the coupon fixed at the uniform allocation rate.
Competitive bids which are accepted and which are made at rates below the uniform allocation rate will be satisfied in full. Competitive bids which are accepted and which are made at the uniform allocation rate may be satisfied in part only. Non-competitive bids will be accepted at the uniform allocation rate. Settlement: Settlement shall take place on 28th April, 2014. Registrar: The Register will be maintained on a book-entry system on the Central Securities Depository and therefore no certificates will be issued.

Listing of Bonds: The security shall be listed on the Ghana Stock Exchange (GSE) for secondary market trading both at the floor of the Exchange or over the counter (OTC). Trading in the securities is subject to the listing rules of the GSE for Government Securities. Redemption The Bond shall be redeemed by the issuer on the maturity date, which shall be 24th April, 2017. Such redemption shall be at par.

April 14, 2014

Courtesy: BANK OF GHANA.

Wednesday, April 16, 2014

PZ Cussons (PZC:GSE) recorded an increase in sales, Find out.

PZ Cussons recorded an increase in sales of 11.5% for 9 months ended February 2014. However operating profit and profit after tax reduced by 97% and 93% respectively due to increasing cost of sales and distribution costs attributed to rising utility and fuel prices. Additionally, the company's exposure to the depreciating cedi affected the cost of production while inflation in the economy has reduced consumer demand and confidence. PZ Cussons finds itself cash-strapped with operating cash reducing by 473.4% while Earnings per share reduced from 0.018 to 0.001, a drop of 93.1%.

Tuesday, April 15, 2014

Top Gainers & Losers on Ghana Stock Exchange in 2014

So far so good in 2014 especially on Ghana Stock Exchange. In Ghana, the time when the stock market was doing so well, the cedi was in disaster and losing so well against major currencies. Now that the cedi is a little stable, the GSE Composite Index is performing at a YTD of 7.71% and the GSE Financial Index at 11.04%. As at 14th April 2014, below are the Top Gainers and the Top Losers on the Ghana Stock Exchange.
Top Gainers in 2014

Click to Enlarge
Courtesy +Joshua Naayo 

Top Losers in 2014
Click to Enlarge
Courtesy +Joshua Naayo  
NB: The fact that a stock has performed well till now in the year is not an indication that it will continue to do well. The market can be full of surprises especially in these hard times in this country and those good performing stocks could become the worst before the year ends. Rather find reasons why these stocks are have done so well so far and then advise yourself. 

Thursday, April 10, 2014

Getting into Financial Blogging – The Story of PEAGAMA...

Re-blogging this article because of the upcoming Blogcamp 2014 at the Kofi Annan ICT Centre on 12th April. Find out how I started blogging on the Ghana Stock market and finance. I'm now an award-winning blogger (Best Business Blog 2012) and a Nominee for the Best Male blogger in Ghana at the up-coming Blogcamp14.

Read more about how I started:

eStock Analysis Blog: Getting into Financial Blogging – The eStock Analy...: My desire to know what’s happening every time on the various financial markets in order to invest or advice people to invest properly l...


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