BusinessDay... the voice of business: Ghana Stock Exchange:  An emerging regional market

Ghana Stock Exchange:  An emerging regional market
================================================================================
EVELYN TAGBO on 07 January, 2008 06:17:00
 
The main foundation for the growth in Ghana's private sector is seen in the
growing influence of its stock exchange. With a surging Gross Domestic Product
(GDP) fuelled by constantly increasing foreign investment, buoyant exports and a
resurgent agricultural sector, the Ghana Stock Exchange (GSE) in 2007 witnessed
one of its biggest booms in recent times.
GSE all-share index, the indicator that measures the value of the quoted
equities closed the 2007 financial year on a good note with a total increase of
31.84 per cent within the period of January 1 to December 31, 2007. As at June
30, 2007, the market capitalization GSE stood at GHc11.47 billion (US$12.34
billion). Within six months, from June 30 to December 31 2007, market
capitalization increased from GHc11.47 billion to GHc12.37 (US$13.01).
According to the last trading day's official list for 2007, the government of
Ghana's 2, 3 and 5 year bonds issued between April 2 and July 30, 2007 valued at
GHc16.46m, GHc191.88m and GHc142.38 respectively was admitted to the GSE
official list on August 31, 2007. Among the quoted banks, a total of 100 million
shares were on August 1, 2007, added to the issued and listed shares of Ghana
Commercial Bank Limited (GCB) bringing it to a total of 265 million shares.
122,457,599 shares of Ecobank Transnational Incorporated (ETI) were also added
to ETI's issued and listed shares. The addition shares were as a result of a
bonus issue in the ratio of ten existing to one new share. Subsequently, with
the 203,931 shares on the Johannesburg Securities Exchange, South Africa, in
October, the issued ordinary of AngloGold Ashanti Ltd increased from 276,929,730
as at October 30, 2007 to 277,133,661 as at November 30, 2007.
Meanwhile, the exchange’s official list also revealed that British American
Tobacco (BAT) was on September 3, 2007 taken off the GSE official list based on
voluntary delisting. Similar to what is obtained in the Nigerian Stock Exchange,
the banking stocks are also the most sought for at the Ghana Stock Exchange.
On the last day of 2007, banking shares fueled the total market share volume by
96.85 percent, recording 931,200 shares out of 961,400. The bulk of the
transaction, on the banking stock, was done on shares of Cal Bank Limited,
Ecobank Transnational and HFC Limited. Within the period under consideration,
the three banks recorded a total volume of 312,600,400,000 accounting for 87.8
percent of total banking shares volume.
Next to banking shares is the only quoted insurance company on GSE, Enterprise
Insurance Co. Limited with a share volume of 26,900. Trailing the Insurance
share, in terms of volume is manufacturing share which was boosted by shares of
Cocoa Processing Co. Limited and Unilever Ghana Limited. Both companies recorded
a share volume of 1,500 within the period under consideration.
The manufacturing shares have not done particularly well. While in Nigeria, the
manufacturing companies are faced with challenge of incessant power outage, in
Ghana the influx of goods from China and other Asian countries, has impacted
negatively on performance pace of local manufacturers.
The new year is likely to see the listing of some of the local IT firms. To
overcome poverty, the government recognizes that the economy must grow on all
fronts and must not be tilted on the agricultural axis as it is now. President
Kufuor whose last year in office began this January, says that the low status of
science and technology has retarded the country's socio-economic development.
This causes many farmers to cling to archaic methods of agriculture and other
industries to hang on to unscientific methods of production.
As part of the financial sector reforms in Ghana, there have been renewed
efforts aimed at promoting investments and listings on the Ghana stock market to
open access to capital for corporate bodies and greater returns for investors.
The stock market provides an added dimension of investment opportunity for both
individuals and institutional investors with the fall in the returns on
government treasury bills and bonds. Thus recent listings on the bourse saw
equities being oversubscribed.
A glimpse of the role that Ghana's newly discovered oil will play in the
country's economy, showed when the Ghana Oil Limited was oversubscribed late
last year by over 100 per cent.
The Ghana Oil Company Limited (GOIL), an oil marketing company, was listed on
the Ghana Stock Exchange in November 2007 as the 32nd equity after a successful
initial public offer, which saw its shares heavily oversubscribed. The company
received total applications worth GHc37.8 million but accepted GHc20.6 million,
overshooting its target of 17.96 million Ghana Cedis when it launched the
initial public offer.
The Ghanaian government, which before the flotation was the sole shareholder,
now holds 51.1 per cent and the public holds 48.9 per cent. GOIL says it will
use GHc5 million out of the envisaged amount to undertake modernization and
revamping of selected stations, to rehabilitate and expand identified storage
depots and diversify into other related businesses, while the remainder goes to
government.
The company will also build new storage tanks at Takoradi to receive new
products, gas oil, gasoline and kerosene and there are also plans to enter the
aviation oil market. Speaking at the listing, Kwadwo Baah-Wiredu, Minister of
Finance and Economic Planning, said the wholly-owned state company was going
public as part of government's strategy to reduce its involvement in the running
of commercial entities.
The minister said it is also in line with a policy to divest government
holdings in state enterprises through the Ghana Stock Exchange. Baah-Wiredu said
government would continue to adopt proactive policies to enhance the growth of
the Ghana Stock Exchange through the provision of infrastructure, tax exemption
on capital gains and development of a vibrant bond market.
This, he said, would encourage private companies to list on the exchange to
boost activity on the bourse and make real the country's goal of becoming the
financial hub in the sub-region. The minister asked the board and management to
comply with the stringent reporting conditions on the Stock Exchange to instil
public confidence in the shares of the company. Yaw Agyeman-Duah, Managing
Director of GOIL, said management would adopt an aggressive marketing strategy
of development to tap unexplored markets.
In addition, the company will position itself in the next few years to take
advantage of the crude oil revolution in the country. Kofi Yamoah, Managing
Director, Ghana Stock Exchange, said it was necessary to reduce the long periods
associated with public offers and listing because it was cost to issuers and did
not help in staying the appetite of would-be investors.
He said the excess demand was an indication of how ready the public was to
participate in offerings on the stock market. Yamoah urged the management of
GOIL to contribute to make the market attractive through the disclosure of all
price sensitive information either good or bad to enable investors make informed
decisions.