THE YEAR 2007 is set to be a memorable one in the history of Ghana, beginning with the Golden Jubilee celebrations, which mark 50 years of Ghana's independence, a Review of Developments on the Ghanaian Financial Markets in 2006 and Outlook for 2007 conducted by the Strategic African Securities (SAS) has indicated.
Ghana will for the first time, issue National Identification Cards to all its citizens and resident foreigners. Last but not the least of memorable events will be the redenomination of the Cedi.
According to a Financial Analyst, Miss Enyonam Dagadu of Strategic African Securities (SAS) who worked on the report, a memorable year for the financial markets is expected as Ghana anticipates a more active bond market and companies raising funds by issuing debt instruments. We also anticipate interest rates will fall further thus engendering the introduction of new yield instruments while businesses take advantage of cheap credit to expand.
New technology and regulation should improve the efficiency and effectiveness of the financial markets to the benefit of investors and other market participants.
The GSE could experience another bullish run this year. We believe Ghana's financial markets are ready for a take-off; sit tight and fasten your seat belts.
Stressing on the outlook for 2007, she stated that the past year was unique and exciting for all stakeholders on the Ghanaian financial markets. Three companies were listed on the GSE after successfully completing IPO's; one company was listed through introduction while another company raised additional funds through the issuance of preference shares and bonds, which were subsequently listed on the Ghana Stock Exchange.
A leading oil marketing company successfully completed the acquisition of another and transformed into a public traded company in the process. The first hostile takeover of a Ghanaian bank was aborted when the BoG refused to approve the transaction and finally the bond market begun to tick thanks to the Government of Ghana and some corporate institutions.
This year (2007), which marks the Golden Jubilee year of Ghana she said, will be filled with more excitement and activity following the festive mood, soaring investor confidence and foreign investor interest that would focus on Ghana.
Exciting Investment Opportunities and Landmark Events
British American Tobacco is expected to kick-off activities on the Exchange through a Tender Offer by its parent company to minority shareholders and the subsequent de-listing of the company.
She said the investment world awaits the divestiture by Government of major stakes in Ghana Oil Company (a leading oil marketing company), State Insurance Company (the largest insurance company in Ghana) and Western Telecommunication Systems (the second largest fixed line operator in Ghana) to investors through the GSE.
Government has also begun the process of privatising Ghana Telecom (the largest fixed line and second largest cellular operator in Ghana) and Tema Oil Refinery (Ghana's only oil refinery).
In addition, Miss Dagadu stated Ghana Commercial Bank, Camelot Ghana and Pioneer Kitchenware, plan to raise additional funds through rights issues.
“Government will also issue and list the Golden Jubilee Bonds on the GSE. Government seeks to raise the cedi equivalent of US$25 million through the bonds targeted at the retail market, which will be used on selected infrastructural projects,” she stated.
In addition, the Government of Ghana plans to issue a sovereign bond on the international market to raise a minimum of US$500 million and it is expected that the bond's maturity period will be between 5-10 years.
“We expect more companies will follow in the steps of Barclays Bank, Standard Chartered Bank, Ghana Telecom and Prudential Bank to issue corporate bonds.”
The GSE will host the next annual African Stock Exchanges Association (ASEA) conference in 2007. This annual event brings together participants from all stock exchanges in Africa to share ideas and network.
The Financial Analyst stated that the planned redenomination of the cedi is expected to commence in July 2007 and until the end of the year when the old currency will be withdrawn from circulation, both the old and new currencies will be legal tender. The redenomination is expected to among others, reduce the cost of transactions. It will also reintroduce the use of coins, ideal for vending machines, parking machines etc. Although most companies applauded this policy, they pointed –out the huge administrative and financial cost for their businesses.
Stressing further, she stated that the full year 2006 results of listed companies should be exciting judging by the nine-month results. “We envisage increased market activity through new issues of securities, increased volumes and values of transactions and higher prices for selected equities bolstered by non-resident foreigners who are beginning to show unprecedented interest in Ghana's financial markets”.
Improving Regulatory Environment
The new GSE Rule Book approved by the Securities & Exchange Commission (SEC) will become effective this year.
The new rule book, according to Ms. Dagadu, liberalises trade commissions. Total commissions and levies will now range between 1.5% and 2.5% of the value of the trade of which 0.75% are payable to regulators hence they are non-negotiable. “Investors are free to shop for the best commission for every transaction they undertake,” she affirmed.
Under the new rules, the Third Official List has been abolished and companies planning to list on the GSE will need to have a minimum of ¢10 billion post-offer capitalisation to be admitted to the First Official List and ¢5 billion post-offer capitalisation to be admitted to the Second Official List.
New listing fees also apply. In 2006, the SEC initiated the drafting of a new Code on Takeovers and Mergers in Ghana and new rules to regulate the unlisted public securities market. “We expect these rules to be implemented this year,” she stressed.
Improving Market Technology
The GSE plans to automate its trading system this year. Once implemented, brokers will trade in securities from their computers either on the floor of the GSE or in their offices. This will bring the GSE in line with most of the emerging markets like Nigeria and South Africa that operate this system.
The Central Securities Depository (CSD) Bill is expected to be passed by Parliament before the end of the first quarter of 2007.
The securities industry is eagerly awaiting the implementation of the law as it will among others, cut down on the paperwork involved with trading and the inconveniences associated with the issuance of share certificates and balance & transfer receipts. When the law is implemented, shareholdings of investors will be registered and kept in an electronic database, therefore the transfer of shares and funds will be done electronically. The CSD will improve existing processes for trading equities thus all market participants will benefit from improved and enhanced services.