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Business News of Monday, 29 August 2005

Source: Nana Kumapremereh Nketiah & Kwaku Afriyie-Oware

Review of Investment Products in Ghana -July

The performance of the financial market in the month of July epitomes the adjustment taking place in the economy as a whole. The equity market did not record any recovery but rather experienced further decline. Among others, weak consumer spending as evidenced in falling turnovers accounted for the poor show of some equities. Yields on short-term money market instruments began adjusting to the reduction in the reserved requirement and the prime rate with an additional decline in treasury bill rates. The cedi was relatively stable on the currency market.

Bearish Trend on Equity Market

On the equity market the bearish sentiments deepened in July sending the DSI falling by 12%. In view of weak consumer spending, it was estimated that fortunes of most companies would decline in the second quarter. In a resultant panic, investors rushed to exit the stock market, thus depressing stock prices further. The performance of equity mutual funds fell in response to the declining market development. The SAS Fortune Fund experienced a plunge of 8.9% followed by the HFC Equity Fund with an 8% drop. The nation?s Premier Equity Fund, Epack shed 3.7% whilst the NTHC Horizon fund fell by only 0.2% in the whole of July. The current situation in the equity market makes a strong case for wider international reach in asset allocation.

Money Market Yields Falls

With declining yields on money market instruments, a marginal gain of 1.3% by Databank money market fund was remarkable. The Mfund closed July at ?1,186.93 per share with an annualized yield of 17.39%. The HFC Unit Trust shed 0.1% in July to close the month with ?1,390 per share. The continuous fall in treasury bill increasingly became unappealing to short ? term investors. At the end of July, the Bank of Ghana and the Government of Ghana issues hovered around 15.53%, 16.43%, and 18% for the 91 day, 182 ? day and 1 year treasury note respectively.

Cedi Remains Relatively Stable

The cedi was outstanding on the inter-bank currency board. Over the past month, the cedi remained stable to the dollar whilst appreciating by 2.4% to the euro. It however dropped by 1.4% to the pound sterling. At the end of July the local currency was quoted at? 9,057.73, ?16,103.75, and ?11,192.07 to the dollar, pound sterling and the euro respectively. The cedi is expected to continue in this trend along with improved earnings from cocoa and gold. Other factors that will contribute to the cedi remaining firm are increased remittances from abroad, inflows from international debt cancellation and the HIPC relief benefits.

The table below shows the performance of the various investments for the month of July.

Investment Products

End of June( ?)

End of July(?)

% Gain/Loss

Mutual Funds




Epack Investment Fund




Databank? Mfund




SAS Fortune Fund




NTHC Horizon Fund




HFC Equity? Fund




HFC Unit Trust




HFC Reit




Gold? Fund




Government of Ghana Bills




91-day Treasury Bill




182-day Treasury Bill




One year Bond




Index Returns




Databank Stock Index? DSI




GSE All Share Index




Inter -Bank Foreign Exchange

















The announcement by the Utility Regulator, Public Utility Regulation Commission (PURC) to maintain the current tariffs on utility namely electricity and water is expected to positively impact on the levels of economic stability for the month of August. The capital market is expected to record higher levels of activity along with the commencement of daily trading. The release of second quarter results by listed companies would inform investors? positions on the prospects in the market.

Our expectation is that the year-on-year inflation will continue to trend downwards in spite of the modest increase in petroleum prices and will subsequently result in lower interest rates in August. Money market mutual funds are however expected to stay ahead of government treasuries.

In the month of August, we expect the cedi to make moderate gains against all the major trading currencies. The persistent increases in world crude oil prices are expected to shore up demand for gold. This together with strong donor inflows and earnings from cocoa will support the strengthening of the cedi.

Ghanaians have an affinity for short-term investing. Most investors are however in a fix, not knowing where to keep their savings. Neither the stock market nor treasuries seem attractive. But, astute investors will rush to take positions in stocks as their valuations have become attractive again.

NB: The writers are Investment Analysts with Databank Asset Management