Ghana Bond Listings Tipped to Beat Stocks in 2019 as Market Dips

ACCRA (Capital Markets in Africa) – Companies in Ghana seeking to issue bonds to meet capital needs are likely to exceed equity offerings in 2019, with the Accra bourse heading for a fall for a second straight year, according to the nation’s securities regulator.

While the Ghana Stock Exchange recorded no new bond issues or equity listings from companies in the first half, three institutions plan to offer debt before the close of year totaling about 350 million cedis ($64 million), Jacob Aidoo, head of issuers at the country’s Securities and Exchange Commission, said in an interview. Investors need to regain confidence in the financial industry after its recent purge for equity offerings to return, he said.

The Ghana Stock Exchange Composite Index, which tracks the performance of the broader market, has lost 5% this year, adding to a 3% decline in 2018. Ghana’s banking industry regulator completed a clean-up and recapitalization exercise in December that saw the closure of several lenders. The sector has since become more liquid, solvent with stronger growth prospects, according to the central bank.

“I don’t really see any equities coming,” Aidoo said. “People want the finance system to gain its confidence — it makes equity a little less attractive for now. For bonds, investors have a guaranteed interest.”

Out of about 35 companies publicly trading in Ghana, almost half are financial stocks and drive market activity more than any other sector. The financial stocks index is down about 5% this year.

The fall in demand for stocks has been partly caused by foreign investors standing on the sidelines ahead of 2020 elections, according to Databank Group Ltd. The value of shares traded in the first five months of the year has dropped to 85.2 million cedis from 413 million cedis a year ago, the Accra-based investment bank has said.

Last year the market recorded three rights offerings worth 696 million cedis, led by banks looking for cash to boost capital. It also recorded its biggest initial public offering valued at 1.1 billion cedis by the local unit of Africa’s biggest telecommunications company MTN Group, aside from a number of bonus share issues by lenders who capitalized retained earnings.

Source: Bloomberg Business News