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Ghana Stocks-worst of 2009... 30% Jump
Expected in 2010
By Masahudu Ankiilu Kunateh,
Ghanadot
Accra, Dec 18, Ghanadot - Ghana’s benchmark
stock index, the world’s worst performer
this year and the best of 2008, will rally
in 2010 as the country is set to become
Africa’s newest oil exporter, according to
Exotix Ltd.
The Ghana Stock Exchange’s All-Share Index
is likely to climb 25 to 30 percent next
year as the west African nation starts
producing oil for export, said Christopher
Hartland-Peel, a London-based analyst at
Exotix, the investment bank focused on
emerging markets.
“We view Ghana as one of the countries that
are going to be among the strongest growing”
in Africa, Hartland-Peel said in a phone
interview. “The reason for this is oil.”
Ghana’s benchmark equity index has fallen 49
percent this year, after gaining 58 percent
in 2008. The bourse plummeted as
international investors fled assets
perceived as risky during the height of the
global credit crisis, and a depreciation in
the currency triggered 20 percent inflation
and a $1 billion International Monetary Fund
bailout.
Stocks are poised to rebound as Ghana’s
Jubilee oil field, off the country’s western
coast, is scheduled to start production in
the fourth quarter of 2010. Discovered in
2007, the field may hold as much as 1.8
billion barrels of oil, with initial
production estimated at 120,000 barrels a
day, according to Tullow Oil Plc, which owns
a 34.7 percent stake in the field. Ghana
will be one of the world’s top 50 oil
producers, according to Tullow.
Treasury Yields
Oil revenue will help Ghana to recover from
an economic crisis that drove its currency,
the cedi, down 15 percent against the dollar
in the six months through July. The
depreciation boosted the cost of imported
goods, lifting consumer price inflation to a
five-year peak of 20.7 percent. Borrowing
costs soared as the rate on 91-day Treasury
bills doubled from a year earlier to as high
as 24.7 percent. The average yield at the
most recent auction was 24.1 percent.
Stocks won’t rebound until an economic
recovery reduces bond yields, according to
Hartland-Peel, who in August predicted a
“gradual recovery” for stocks. “If you can
get 23 to 24 percent in Treasury bills, why
put your money in the stock market?” he
said.
High inflation and interest rates are the
“greatest” challenge facing the bourse, Ekow
Afedzie, deputy managing director of the
Ghana Stock Exchange, said in an interview
in Abuja, Nigeria, on Dec. 3. “Once we get
these going in the right direction, the
market will rebound,” Afedzie said.
The central bank cut its key lending rate
for the first time in nearly three years
last month, by 50 basis points to 18
percent. Further cuts may follow after
consumer inflation fell for the fifth
straight month to 16.9 percent in November.
Guinness, Unilever
The country’s budget deficit will fall to
about 10.2 percent this year and 7.5 percent
in 2010, from a peak of 24.2 percent in
2008, Finance Minister Kwabena Duffuor said
last month. Economic growth will likely
reach 5.9 percent this year and 6.5 percent
in 2010, the government predicts, after a
growth of 7.3 percent in 2008.
The cedi has gained 4.9 percent against the
dollar since the International Monetary Fund
agreed in July to lend Ghana $1.02 billion
over three years.
Companies that suffered declining profits
this year including Guinness Ghana Breweries
Ltd., the country’s biggest beer maker, and
the local unit of Unilever Plc, will rebound
as the economy recovers in 2010, according
to Exotix.
Guinness Ghana fell 32.5 percent this year
and jumped 63 percent in 2008. The company,
based in Accra, said Nov. 17 profit for the
year ending in June fell 17 percent to 11.4
million cedis ($8 million).
Pension Plan
Unilever’s local producer of household
products such as Omo laundry soap and Blue
Band margarine said Oct. 30 net income for
the nine months through September fell 96
percent to 1.05 million cedis. Unilever
Ghana Ltd. dropped 15 percent this year and
rose 190 percent in 2008.
Ghana Commercial Bank, the country’s biggest
lender with 157 branches, lost 36 percent
this year.
The stocks may also benefit from 1 billion
cedis set to be invested in Ghana’s
securities markets through a government
pension-reform program that starts next
year, allowing private brokers to develop
and manage corporate retirement plans.
Ghanadot
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