Capital Markets
From The Report: Ghana 2019
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After a surge in stock prices in 2017 that saw the Ghana Stock Exchange (GSE) become the best performing exchange globally, the GSE experienced a significant setback, posting net declines in 2018. Nevertheless, the strong performance of the country’s main index in 2017 has renewed interest in the market as a means of raising capital and made Ghanaian equities a more attractive prospect for investors. While challenges remain, including a lack of variety in investment instruments and low levels of liquidity, the introduction of new minimum capital requirements for banks, coupled with the sustained growth of one of sub-Saharan Africa’s fastest-growing economies, appears set to boost the raising of capital and stock prices over the course of 2019. This chapter contains interviews with Daniel Ogbarmey Tetteh, Director-General, Securities and Exchange Commission; and Alex Asiedu, Managing Director, STANLIB.

Articles from this Chapter

Overview

Fully stocked: Economic stabilisation and regulatory reform boost exchange activity as the country turns to debt markets
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After a surge in stock prices in 2017 that saw the Ghana Stock Exchange (GSE) become the best performing exchange globally, the GSE experienced a significant set back, posting net declines in 2018. Nevertheless, the strong performance of the country’s main index in 2017 has renewed interest in the market as a means of raising capital and made Ghanaian equities a more attractive prospect for investors. While challenges remain, including a lack of variety in investment instruments and low levels…

Analysis

Finding alternatives: Attempts to raise awareness and the launch of a new fund appear set to support greater activity on the parallel market
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The Ghana Alternative Market (GAX) – established in 2013 as an equity market for small and medium-sized enterprises (SMEs) – has had a slow start, signing up only five companies as of January 2019. One reason for the low uptake has been the, until recently, relatively muted performance of the main exchange. The Ghana Stock Exchange Composite Index was mostly stable following the establishment of the GAX, travelling between 1950 and 2450 for the first two years, before declining to 1550 by the…

Interview

Capacity building: Daniel Ogbarmey Tetteh, Director-General, Securities and Exchange Commission (SEC), on improving regulations and market activity
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Interview:Rona Fairhead What regulatory changes are being made to strengthen market activity and processes? RONA TETTEH: Since the current board of the SEC was constituted in 2017, our focus has been to increase the level of capital market activity and, most importantly, fill the regulatory gaps. Without an effective framework in place, the private sector cannot be expected to perform optimally. As part of the regulatory process the SEC releases guidelines for comments from the market operators…

Analysis

New regulatory scope: Bank consolidation to improve assets and strengthen confidence
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Avoiding a crisis in the investment industry will involve a clear-headed, firm approach from the regulator. Media coverage has mostly highlighted failed banks and the crisis in the banking sector, but few firms in the broader financial services industry have been left unscathed. Across the industry, firms that may have been exposed to the failed banks have had a difficult run as they struggle to shore up their liquidity in the wake of the crisis. Investment firms have not been spared the correction. Ghana’s asset management industry is a moderate contributor to the larger banking sector. Assets under management in 2018 totalled GHS45bn ($9.7bn),…

Analysis

Private equity: Time for alternative asset classes
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The revision of investment guidelines for private pension funds in 2017 has rekindled local interest in private equity (PE), giving some local PE fund managers a reason to focus their fundraising lens on private pension funds. This push, as advocated for by industry stakeholders, will enable pension funds to invest directly and make an impact on the real economy. The subsequent release of private equity guidelines by the Securities and Exchange Commission (SEC) highlighted the increased importance of this asset class. However, there is still further work to be done before the benefits of this asset class can be fully leveraged. Private Pension…

Analysis

Debt market: Analysis of sovereign and corporate bonds, and the pension fund
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Ghana’s debt market shows an interesting picture of growth and change, especially in the past five years to 2018. A major fillip to this growth is the government’s use of the debt market as one of the major platforms for raising domestic debt to support its yearly budgetary shortfalls. Similarly, private investor participation in the market has increased given the rewarding interest rates and perceived non-existent risk. An analysis of government bonds, corporate bonds and the pension fund will help further explain the preference for debt. Government Bonds The Ghana Stock Exchange (GSE) commemorative registered stock, which was issued to…

Interview

Positive outlook: Alex Asiedu, Managing Director, STANLIB, on diversified investment options and building trust in the industry
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Interview:Alex Asiedu What is the state of the equity market in Ghana? ALEX ASIEDU: In terms of asset allocation, existing conditions have remained largely unchanged since 2013. It may be difficult for the middle class to identify possible alternatives, as there are not many options available on the market. It is difficult to consider alternatives when they inevitably have uncertain returns. These alternatives are in competition with the near certainty of short-term, fixed-income options.…

Overview

Indexed growth: Inclusion in global indices often results in a greater flow of funds to capital markets, but it is just one aspect of the economic picture – Ghana
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The period of easily raising funds from abroad seems to be coming to an end for emerging markets around the world. In the new environment of higher interest rates in the US and increased competition for capital flows, portfolio managers are becoming more selective with where they place their money. One way for developing nations to ensure that their financial markets can continue to attract foreign funds and remain sustainably liquid is by being included in well-regarded benchmark indices. In addition to drawing in fund managers, inclusion in such indices requires specific standards that indicate that the participating countries apply certain…