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07.05.2007 Business & Finance

New Ghana cedis: Value not the same on stock market?

By myjoyonline

Investors on the Ghana Stock Exchange may be exposed to losing some of their wealth despite repeated assurances that the forthcoming cedi re-denomination will cause 'no change in value'.

The re-denomination will remove four zeros, making ¢10,000 become Gh¢I and leave some share prices with lower value when converted into the new currency.

For example, the share price of Super Paper Products Company that trades at ¢225 will become 2.25 pesewas, thus causing investors to lose the 0.25 pesewas.

It is also unclear what the result will be of the one cedi (¢1) price appreciation during trading. These are questions some investors for the past weeks have been asking and whether their interests would be protected after the exercise.

The Business Week newspaper quotes Mr. William Mensah of Ecobank Stock Brokerage in an exclusive interview as saying that though it was not conclusive as to what would really happen on the floor, he thought that the value would still remain the same. "The prices or value of stock on the Ghana Stock Exchange would not be affected," he noted.

He explained that after the exercise, prices would now be quoted as per the format used by forex bureaux. He said prices would be quoted to four decimal places.

This, he said will protect investors' interests more than when prices are quoted to two decimal places.

Commenting on how a cedi price change on the Exchange would be quoted, Mr. Mensah said though he is aware that after the redenomination the minimum price change will be one Ghana pesewas, quoting prices to four decimal places would solve the problem.

Currently, during daily trading most price changes are below ¢50, which the redenomination does not cater for. This means that when there is a change of ¢I in an equity on the Ghana Stock Exchange after the redenomination, this would be Gh¢O.OOOI or Gp0.01.

The current prices of listed equities on the Ghanaian bourse range from ¢225 to ¢300,000. After the redenomination, the range would change from Gp2 to Gp3000 if quoted in new Ghana pesewa, and Gh¢O.23 will change to Gh¢30.

The Business Week said the Ghana Stock Exchange was consulting with other stakeholders to come out with a solution to the challenge.

Bank of Ghana officials and most economists agree, however, that the redenomination will not have any impact on the value of the currency in any direction ¬except that it will make transactions faster, easier and safer.

The policy initiative from the central bank has been touted as a mark of its independence and part of the growth of the country's democratic process.