Accra, Ghana//-Businesses have been urged to come to the Ghana Fixed Income Market (GFIM) of the Ghana Stock Exchange (GSE) to raise long-term capital for investment.
The GFIM which is a secondary market for trading of all fixed income securities and other securities to be determined from time to time, is the right place for businesses which need capital for investment.
The Head of GFIM, Augustine Simons made the call at the Institute of Financial and Economic Journalists’ (IFEJ’s) capacity building workshop dubbed-‘Time With Ghana Fixed Income Market’ held in Accra.
It is high time for businesses as well as struggling state-owned enterprises (SOEs) to take advantage of the GFIM to issue securities on the local bourse, he added.
Mr Simons noted that since the inception of the GFIM in 2015, it has sold securities worth billions of Ghana cedis to its numerous customers.
Government and corporate securities
As of the end of June 2022, there were three benchmarked government Securities which are the 7 year, 10 year and the 15 year tenors.
Other government securities according to him are 50 non-benchmark bonds with tenors from 3-year to 20-year; 12-year; 2-year notes; and 91-day to 364-day bills.
There are also four local US dollar bonds (3-year & 5-year). The market takes into consideration nine Eurobonds, Mr Simons added.
While there are eight corporate institutions that currently have active debt instruments on the market with tenors ranging from 5years to 10years.
Regulation and governance
The Securities and Exchange Commission (SEC) is the main regulator for the market, whereas the Bank of Ghana (BoG) is consulted on matters to do with the requirements and responsibilities of Primary Dealers.
It is also concerned with the types of products issued on the GFIM, especially money market instruments.
“The Governing Committee has the authority of the Council of the GSE for the oversight and well functioning of the market and therefore takes decisions on all matters relating to GFIM”, Mr Simons explained.
He was quick to add that at the GFIM Governing Committee decisions are reported to Council, emphasizing that the Governing Committee has set up a Technical Committee to oversee all the technical aspects of the market.
The GFIM has its own rules that guide the operations of the market, Mr Simons added.
Causes of market trends
Touching on the causes of market trends, he noted: “Movements in interest rates tend to follow long-term growth and inflation trends. If inflation is moving higher, interest rates tend to follow suit.
Interest rates on the debt market have increased and thus created the avenue for more sell-offs thereby increasing trade volumes on the market”.
The high interest rates especially at the end of the yield curve are enticing to the investor thus more investors flooding the longer dated securities.
The increased cash reserve ratio (CRR) from 8% to 12% has caused illiquidity on the market thereby causing a lot of borrowing. The better way for any lender on the capital market is to lend using the bond market through sell buy backs.
The depreciation of the Ghana Cedi against major trading currencies such as the US dollar and pound sterling has resulted in foreign investors exiting the market, according to him.
However, due to the reduction in foreign investor participation over the years, the effects of their exit have a huge impact on the secondary market.
Green bond market coming
The Head of Ghana Fixed Income Market (GFIM) at the GSE used the event to assure the investor community that the GSE would soon issue green bonds.
He therefore encouraged companies in the country to take advantage of the upcoming green bond market.
The Deputy Managing Director of GSE, Madam Abena Amoah who led her team to the day’s workshop, encouraged domestic and foreign companies to turn to the local bourse for their investment needs.
The Head of Trading at the GCB Limited, Daniel Boateng advised Ghanaians not to open multiple accounts at the Central Security Depository (CSD). This, according to him, could lead to loss of investment funds.
African Eye Report