2011 Year Review Chart of Ecobank Ghana Ltd (EBG) on Ghana Stock Exchange

Ecobank Ghana Ltd (EBG) on GSE. - 2011 Review.

Comparing EBG stock & the GSE Composite Index

Courtesy: Bloomberg

2011 Year Review of CAL Bank on the Ghana Stock Exchange.

Overview of Company

 CAL Bank Limited formerly Continental Acceptances Limited and then CAL Merchant Bank was incorporated on March 20, 1989 but the bank was licensed in June 1990 and commenced business in July 1990. With issued shares of 238,802,978, CAL Bank is listed on the Ghana Stock Exchange (GSE) and the share price is 0.23p as at December 6, 2011. We would be looking at how this bank performed on the GSE for the 2011 financial year.
As at 31st December, 2010, the Social Security and National Insurance Trust (SSNIT) held 82,363,074 shares in the bank making 34.13% whiles Mr. Afare Donkor, the largest individual shareholder and second largest shareholder held a stake of 7.51% representing 18,120,000 shares.



Analysis

CAL Bank began the year, 2011 with a share price of 0.33p (04/JAN/2011) and because of investor activities & active trades, share price of the bank rose to 0.39p (04/FEB/2011). Meanwhile, the stock price dropped steadily after that time to close at 0.26p on 22/March/ 2011. Further fluctuation of price was recorded from July to October 2011. Ten months down the year, CAL recorded a Year high of 0.39 pesewas and Year-Low of  0.25 pesewas (p). The volume of trade heightened at the end of October and hence was reflected by an increased in share price by some pesewas.
CAL stock and other financial stocks performed badly in November making the Financial Stock Index remain lower than the Base index of 1000.

The Year 2011 obviously was not the best year for most stocks on the GSE and CAL Bank is no exception.

I would be writing on Ecobank Ghana Limited (EBG) in my next post. I would be reviewing EBG stock on the Ghana Stock Exchange for the Year 2011.

[Courtesy: Ghana Stock Exchange, Bloomberg]

Listing & Trading Rules are set for ETFs on GSE.

Exchange Traded Funds (ETFs) are considered by some financial gurus as an investment product of choice for the inexperienced trader all the way to the professional money managers. In emerging financial markets like that of Ghana, ETFs are yet to see the light of the day. The Ghana Stock Exchange (GSE) announced the introduction of  ETFs in to the market sometime ago and finally, the Securities and Exchange Commission (SEC) has approved the Rules for the Exchange Traded Funds. 
The general listing rules prescribing the requirements for obtaining and maintaining the listing of securities on the Ghana Stock Exchange does not apply to ETFs hence different rules were set for listing and trading. With reference to the Rules for ETFs released this month, trades in ETFs shall be settled through the Clearing and Settlement System of the GSE and Securities Depository System of GSE Securities Depository Ltd just like stocks on the GSE.
This same document revealed that an application for the issue of ETFs must include, Net Asset Value (NAV) of the ETF as at the date of application and the Percentage change of the NAV of the underlying basket of securities / index / underlying asset for the previous 6 months on a weekly basis, among others. The criteria for listing revealed that, the ETFs must be open-ended and fully secured at all times: either by the underlying securities/commodities or financial instruments it represents, a proxy security
acceptable to GSE which should be listed, freely tradable and have adequate liquidity or cash. Looking at the current affairs of the capital market, liquidity issues are very important to the GSE & SEC.
Further scrutiny of the rules showed that, ETF issuers must undertake to compute the Net Asset Value of the ETF on a daily basis and make the NAV public to all market participants at the same time through the GSE. Obviously, no insider trading would be encouraged. The condition for listing stipulated among a list of requirements that, GSE may, in its overriding discretion, grant a listing to an Issuer who does not fulfill the requirements set out or refuse a listing to an Issuer who does not comply with the listing requirements on the basis that, in the GSE’s opinion, the grant or refusal of the listing is in the interest of the investing public.

In terms of pricing the ETFs, the rules stated that, the issue price shall be on a basis approved by the Exchange and shall not include management charges and other fees. Moreover all management charges and other fees are required to be separately specified in the offer Document.

The rules for ETFs are very clear and easy to understand. For more analysis of the essence of these rules, join me on Twitter: peagama (click to follow) or facebook: Patrick .... and let's discuss.
For more details on the Rules for ETFs in Ghana, Click to download full document. (Courtesy: GSE, & SEC).

Looking at the GH 2012 Budget, the Bond way.

The 2012 Budget with the theme “Infrastructural Development for Accelerated Growth and Job Creation” was described by the Majority in Parliament as the best ever but the Minority said it was a repetition of the past budget. The Minister for Finance and Economic Planning, Dr. Kwabena Duffuor outlined in his speech, the plans for the Bond Market and that was what caught my attention.

Over the years, the capital market has been growing slowly and highly dominated by activities in the stock market. The bond market on the other hand is dominated by the Government bonds with very few corporate bonds. In order to ensure accelerated growth as predicted by the budget, the government plans to deepen the bond market. To ensure long term debt instruments, the government of Ghana would be issuing a 7-year and 10-year fixed rate bond next year. In addition, the government will set up a National Bond Market Committee in 2012 to undertake the tasks. Dr. Kwabena Duffour mentioned that, this Committee would be tasked to first of all, identify the constraints in the development of corporate bond market. Moreover, it would study and recommend legal, institutional and process changes needed to accelerate the development of a corporate bond market.

 The Minister further outlined that; this committee would monitor the performance of the government bond market and to improve its effectiveness as an anchor for the corporate bond market. In regards of deepening the bond market, this committee would finally assist the private sector to access the bond market by proposing appropriate financial/technical assistance mechanisms.

This move by the Government for the 2012 fiscal year is good for the bond market and the capital market as a whole.

We hope to see it manifest. Else...................... 

11/11/11 on the Ghana Stock Exchange.

The number 11 is perceived by many people as 'A LUCKY NUMBER'. In Astronomy, Apollo 11 was the first manned spacecraft to land on the Moon and  in religion, the Eleven apostles of Jesus (i. e. Judas excluded) were perceived to be the blessed and righteous ones. On this special day, 11th Nov., 2011, let us take a look at what happened on the Ghana Stock Exchange to see whether the fortune of the day had an effect on trading.

A volume of 130,810 shares were traded today, which was barely half of what was traded yesterday and the GSE Composite Index (CI) dropped by -0.86 points to close at 997.42. 

Meanwhile, the GSE Financial Stock Index gained 2.72 points to close at 900.31. 

GSE-CI is lower than the base index of 1000 that was valued on December 31, 2010.

Six (6) stocks recorded changes in price today. 

TOTAL traded 180 shares and lost 0.01p to close at GHC 21.00.

Tullow Oil (TLW) also traded 161 shares and lost 0.08p to close at GHC 31.00.  

Two banking stocks, Standard Chartered Bank (SCB) and Ecobank Ghana (EBG)

closed at GHC 45.50 and GHC 3.45  by losing 0.02p and 0.05p after trading 100 and

14515 shares respectively. SIC Insurance and Benso Oil Palm Plantation (BOPP)

also gained 0.01p each to close at 0.41p and 0.86p respectively.

Today's trading only favoured some financial stocks but not the Composite index. 

Shareholding of The Trust Bank (TTB) as Ecobank tries a Takeover

The Trust Bank (TTB), with about 20 networked branches covering Ghana,  is undergoing a takeover by Ecobank which most people including the Coalition for the Protection of Individual and Constitutional Rights are against. Meanwhile, shareholders of TTB, are strongly in favour of the takeover by Ecobank, the leading Pan- African Bank. Who then owns TTB?

The shareholding structure of TTB reveals that, The Social Security and National Insurance Trust (SSNIT), the single largest pension fund in Ghana is the largest shareholder with about 61.11% stake. SSNIT, with reference to the recent pressure from pensioners supports the takeover. 
The second largest shareholder is Compagnie Africaine de Financement et de Participation (COFIPA), a Paris-based investment company owned by West African businessmen. COFIPA has also agreed to the takeover by Ecobank. 

 The Trust Bank which remains one of the fastest growing banks in Ghana gained so much trust from Ghanaians and that reflected in the Total Bank Deposits rising from about 39.17million GH cedis in 2003 to about 239.55 million GH cedis in 2010.


The 3rd largest shareholder of TTB is FMO – The Netherlands development finance company,which has about 10.00% stake. FMO, like other shareholders have voted in favour of the takeover by Ecobank.
The Ghana Reinsurance Organisation remains the second major local shareholders of The Trust Bank. It has about 9.39% stake in TTB making it the 4th largest shareholder. With a stand just like SSNIT, Ghana Reinsurance Org. supports the takeover despite the rumour that the Minister of Finance, Dr Kwabena Duffuor, has blocked the takeover.


Africa Tiger Mutual fund, an investment company registered in Ghana, is the smallest shareholder of TTB. And with 6.00% stake, it stands to be the 5th and the 3rd local shareholder of TTB.


Only time can tell whether the sale of TTB to Ecobank Transnational Incorporated (ETI) would be successful. 

Year Highs & Lows of Fan Milk Limited on Ghana Stock Exchange

After ten (10) months of trading on the Ghana Stock Exchange (GSE), the Year High of Fan Milk Limited (FML) still remains low comparably, and this is not impressive. Last year, Fan Milk Limited recorded a Year high of GHȻ 10.57 by the close of trading on 10th December, 2010. In that same year, the Year Low of FML as at 10th Dec. was GHȻ 5.55, although GHC 2.5 was recorded on 4th & 5th January. Investors obviously had confidence in the ice cream company and kept trading shares day to day. 

Fan Milk Limited began the year, 2011, with a Year High of GHȻ 2.45 (i.e. on 4th January) and ten (10) months down the road, the Year High was recorded as GHȻ 3.11 (i.e. on 2nd November). October ended with a little tumble of FML share price but November brought a recovery smile as investors gained confidence in the stock. Trading of FML shares on the GSE have been consistent since last week and this is good for the market.

The ice cream company still remains the leading producer of ice cream in the Ghanaian market. Monopoly, people call it, but I call it Supremacy. FML is currently trading at GHȻ 2.53 per share.

One year GSE Equities Trend Analysis for FML, EBG & GCB

One Year EQUITIES TREND ANALYSIS. [Charts from Databank Financial Services]

Fan Milk Limited (FML)

  Ecobank Ghana Limited (EBG)

  Ghana Commercial Bank (GCB)

 

JP Morgan, IBM & Goldman Sachs Daily Charts.

 
                                                        JP Morgan Daily Chart. (14-Oct, 2011)

                                                                     
                                                                      IBM Chart (14 Oct. 2011)

Analyzing the Wealth of Steve Jobs from US$1500 to US$8.3 billion

From a humble beginning, Steve Jobs started Apple with Steve Wozniak and Mike Markkula. Jobs invested his Volkswagen bus valued at $1,500 and Wozniak invested his calculator, valued at US$250.

From the investment of US$1,500, Steve Jobs became every body’s hero and a billion in America. But before then, he ‘stayed hungry and stayed foolish’. When Apple began to expand, the company looked for an experienced executive to help manage its expansion. So many people came on Board as well as investors. Steve Job lured Sculley John in to Apple away from Pepsi- Cola by asking him whether he would like to sell sugar water for the rest of his life or join him to change the world.  Whiles most of Jobs’ employee thought he was too temperamental, he stood by his principles and gets the job done at all times.

An internal power struggle at Apple and redundancies at the time made Sculley relieved Jobs of his duties. The Co-founder was fired.  To Steve, "The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods of my life."

Jobs owned 7.5 million shares when they went public and with an IPO price of $22 per share that makes his $1,500 investment in 1976 worth $217 million in 1980.

Steve Jobs left Apple to start NeXT Computer in 1985 with $7 million and when things were going bad, the Billionaire Ross Perot invested a lot of money in the company.

Steve later bought The Graphic Group (Pixar) for $10 million of which $5 million was given as capital. After some time, Jobs announced that Disney had agreed to buy Pixar which was worth about 7.4 billion. This transaction made him the largest individual shareholder with about 7% stock holdings in the company. The sale of Pixar to Disney brought the largest impact to his net worth valued at above $7 billion today.  Along with the sale of Pixar, Jobs gained a seat on the Disney board and increased his net worth to more than $5.1 billion from a worth of 4.3 billion representing 138 million shares in Disney.

Apple Inc. bought NeXT Computers for US$429 million in 1996 and that was how Steve Jobs came back to his company. At the 2000 Macworld Expo, Jobs became the permanent CEO of Apple Inc. but in August 2011, Jobs resigned as CEO, but remained at the company as chairman of the company's board and director on Disney board.

Money is not the key motivator for Steve Jobs but he died a Billionaire (has a net worth of $8.3 billion as of March 2011), a great contributor to the American Capital market and an inspiration to young entrepreneurs or business owners.

Courtesy: Market Watch, Wikipedia, Investopedia, Forbes and Apple Inc.

How to start investing (104); Various Types of investments in Ghana; The Money market..

The Ghanaian investment community has been developing every day and it is good to know that, the other side of the investment coin (the money market) is very rewarding as compared to other economies on the African continent or the whole world as a whole.

The money market trading involves trading of low risk securities which are usual short term unlike the capital market. Most people perceive this market as less rewarding since it is a low risk market. But in a developing country like Ghana where Treasury bill rates are above 12% and other low risk rate securities are becoming good investments, what else can you think about than to venture.

Let us now look at the various short term securities in the Ghanaian investment community and how to take advantage of them.

First, is the Treasury bill which is a product of the Bank of Ghana on behalf of the Government of Ghana. It involves lending your money to the Government at a fixed interest rate. This rate is fixed and there is very little or no risk at all when it comes to payment.  The Treasury bill is in form of 91-day bills, 182-day bills or 364-day or 1-year note. Each of these bills has separate fixed rate interests and mature after such days after which the Government will repay the principal plus the interest on it to the investor. Most commercial banks and brokerage houses in the country offer this investment on behalf of the Bank of Ghana. It is safe and short term.

Another investment in Ghana is the Certificate of Deposits (CD). This investment is a financial document showing that a person or organization has a specified sum on deposit at a bank, usually for a set period which comes with an interest rate. Most large companies in Ghana invest in this and very few individuals get the chance to invest in this because in involve very high amounts.

Fixed deposits are another form of investment in Ghana offered by most commercial banks at attractive rates. They are safe and good for low risk takers or investors. Most people also consider savings accounts of the various commercial banks as investment option. In Ghana for instance, banks offer attractive interest rates on the accounts of money savers hence people prefer them to other investments.

Investors must note that these short term securities are good especially for low risk takers but must be understood properly. These are not good for all investment goals especially those targeted at creating wealth. Most of the time people used these investment options to maintain the value of their money over some time.

Keep learning about them and take advantage of them.

How to start investing (103); Various Types of investments in Ghana and their risk profiles.

In the last post on this blog, I wrote on setting an investment goal. Thus if the goals is set, then we are now in the best position to look at the various investments opportunities, their risks and whether they are long term or short term.

The Capital market is a long term market and in Ghana, there are a lot of investment opportunities in this market. First is the investment in Stocks. There are shares of companies listed on the Ghana Stock Exchange(GSE) ranging from the financial industry that includes banks like Standard Chartered Bank (SCB), HFC bank, UT Bank, SG-SSB, Ecobank Ghana limited (EBG), CAL bank , through the manufacturing , mining, agriculture industries to the food/ beverages industries. There are about thirty six (36) companies currently listed on the GSE with various prices from as low as 0.05p per share to as high as GHC 55 (about $ 38) per share.

There are two indexes for the exchange to help investors know the performance of the market and they are the GSE Composite Index (GSE-CI) which includes all stocks on the GSE and the GSE Financial Stock Index (GSE FSI) which include only the financial stocks and currently have a year to date rate of 13% and 6% respectively.

Investors should note that, investing in stocks is a risky but rewarding business hence not advisable until one is properly abreast with the mechanisms involved. Moreover, there are over fifteen (15) brokerage firms that could assist you in making the right investments when it comes to stocks.

Other investment opportunities in the capital market of Ghana include investing in Bonds and Mutual funds. Bonds are debt instruments issued for a period of more than one year with the purpose of raising capital by borrowing. The Government of Ghana has issued some many bonds in the past and is still issuing from time to time. There are 2-years, 3-years and 5 years government bonds available for investors with very good coupon rates.  There are corporate bonds like the dollar bond from HFC bank.

Mutual fund as defined by Investopedia.com is an investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds in Ghana are managed by most brokerage houses like Databank Financial services, SDC financial services; EDC brokerages firm and so forth. Some mutual funds in Ghana are as follows; IFUND (EDC brokerage ltd.), SAS fortune fund (SAS brokerage), Mfund, Ark fund, Balanced Fund and EPACK (Databank brokerage ltd). Also we have HFC equity fund, HFC unit trust, Stanbic Investment fund, Campus mutual fund, First fund (First bank) and a lot more with various bid and sale prices. These funds have different time horizons and risks profile hence investors with less knowledge about the financial market should seek advice before investing.

Knowing your personal risk tolerance is the key to good investing. Investors assess themselves and know their ability to take risks. Some investments are high risk investment and this means that, the probability of you, the investor losing your principal (initial amount deposited in the investment) is high; also the probability of you making very high gains is high. You would have a high risk tolerance if you have the ability or heart to stand the pressure of losing some or even the entire principal. On the other side, not having the courage to lose a cent is a sign of having low risk tolerance.

My advice is for you is to follow this blog in order to learn more about the financial market and investing as a whole. In the next post, we would look at the other side of the financial market in Ghana which is the money market (short term) investment options.

Keep learning and investing.

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How to start investing (102); Setting the Investment Goal.

The journey to success in investment continues as we look at the basics to investing.

Every good investment should have a goal or an objective. Setting an investment goal is important and must be taken seriously by every aspiring investor. Do not look at a friend’s success in the stock market and just rush to invest. There should be a reason to invest. This objective would help select the best investment to undertake with respect to your risk profile and time horizon.

Setting investment goals like, “I want to invest in order to be very rich” is not realistic and too vague. Investment goals must be realistic and very specific.

You can set a target amount to hit by a particular time. This would advise your choice of investment. People set investment goals to pay school fees, pay bills, service debts, build businesses and so forth.

Setting a good investment goal does not guarantee success of investment but it gives purpose and direction to the investment. Success of the investment would depend on the investment itself and market activities. Getting your funds into the right investment at the right time would make you a successful investor. Do not be afraid of losing your money, just get the basics right.

To start investing, an individual must select an investment to suit the purpose and risk profile. Each investment has an amount of risk, meanwhile some investment risks are so insignificant, and hence such investments are called risk-free investments.

In the next post, we would continue with the investment series and learn about the various investment options in Ghana.

Follow the next post, “How to start investing 103: Various Types of Investments, in Ghana and the risks.”

How to start investing (101), Preparing yourself for investment in Ghana.

In this era of hardship, low job remunerations, high dependency and a lot of responsibilities, people are now looking for new job opportunities whiles others want to properly manage their finances to cater for all their needs. Most people look for investment opportunities to make more money out of the little they get. One thing that serves as a hindrance is that, they do not know how to invest. Some people have money but do not know how to invest whiles others think they do not have at all to even invest.

In Ghana for instance, there are so many investment opportunities but before we look at them, let us know the necessary steps needed to start investing.

The first step to starting investment is for an individual to resolve all financial issues like debts. It is advisable to pay your debts and plan not to incur any more. Debts increase your liabilities and make it difficult for wealth creation.

Another crucial thing needed for starting investment is to develop a saving culture or habit. This means, you must get a plan to put money at the bank (recommended) or somewhere for future investments. It involves selecting a good bank and opening a saving account where you would regularly, perhaps monthly or weekly deposit an amount of money for safe keeping as you think about where to invest.

The third important thing is to review personal incomes and expenses. This involves taking note of the income avenues like your job or private businesses and expenses you make. Investors always make sure their incomes are more than their expenses and this makes it possible to get some money to save for investing. Meanwhile, if your expenses exceed your incomes, there is nothing to worry about. You can develop a rule for the use of monies that come to you. An example is the famous 10-10-80 rule. This rule means that, for all monies that come to you, 10% is set aside for investment, 10% for paying your tithe (esp. the religious) and 80% can be used for other expenses. Other people prefer the 20/80 rule, where 20% of all incomes are set aside for investment in a savings account and 80% covers important expenses. With this rule, anyone can get money to invest to yield attractive returns.

A practical example is that, assuming a person has $ 1000 expenses to make and gets $ 1000 income either through salary or any other means, that person can set aside 20% which is $200 for investment and used the remaining $800 for the expenses. And since that would not be enough, expenses must be cut down to meet the money available. In so doing, you would always pay yourself first before paying others and that would help accumulate money for investing.

It takes a lot of discipline to do this and this must be done for all incomes. You can also seek financial advice from experts on how to do this.

Please follow the next post to know the various investment opportunities available for you, where to find them, how much is required to invest in them and the risks associated with them.

What is Short-Selling and why the ban in some European markets?

Short Selling as I explained to my younger brother is that; I borrow his nike school bag and sell at a price let's say GHC 2.00 and then hope for the price of the same nike school bag to come down to GHC 1.00 in the market. And after that I quickly buy the same nike school bag for him at the current market price of GHC 1.00 leaving me with GHC 1.00 of which I pay him a lending fee ( 0.20p) and keep the rest. (0.80p).
It is quite obvious in the case that, if the price of the nike school bag rises from GHC 2.00 to GHC 3.00 after I bought from him, I would make a loss of GHC 1.00 since I have to return his nike school bag (by buying) for him to go to school. In a more matured example, I approach an Investor of Company A to lend me 1000 shares which currently trades at $ 100 per share. (i.e. $100,000) then I sell those shares at $100 per share hoping for the price to drop to $50 per share. When that happens, I buy the same 1000 shares of Company A at $50 per share and give back to the Investor of Company A with the lending fee whether the value decreases or not. The market can turn in favour of the Investor too.
Short selling of assets mostly occurs in the securities markets and most experts allude market volatility to it. In most European markets, short selling has been banned to reduce market volatility. France, Spain, Belgium and Italy are prohibiting short sales on bank stocks and it is likely other countries would follow.
Investors are now skeptical of what would happen to the market now that short-sellers are out.

What you should know about Accra Hearts of Oak and their IPO

Accra Hearts of Oak Sporting Club popularly known as PHOBIA was one of the earliest clubs to be formed in Ghana in November, 1911. This sporting club has currently issued an initial public offer and this is the first of its kind in Africa. If this IPO is successful, shares would be listed on the Ghana Stock Exchange and would make a historic mark in the IPO records in Ghana and Africa as a whole.

There are so many things that make an IPO successful and some important factors to consider are the financial status and future prospects of the company. Accra Hearts of Oak although currently in debt has assured the public that its operations would change drastically in a positive way after the IPO. The Board Chairman, Mr. E. M. Commodore-Mensah says the capital from the IPO would be used to enhance activities in the club. Experts are predicting that, this IPO would be successful because of the support or fan base of the club and the sentiments attached to the club by the fans. Apart from Kumasi Ashanti Kotoko (a football club), Hearts of Oak has the largest fan base in Ghana.  Nevertheless, people are with the view that the price per share (0.50p) is too expensive looking at the stature of the club.

Hearts of Oak has won twenty (20) titles in the Ghana Premier League and six of them were consecutive (1997 to 2002). The Sporting club has also won nine (9) championships in the FA cup and had one CAF championship league title in 2000. In addition, they are seven times winners of the Ghana Telecom Gala. One of the most prestigious cups in Ghana is the Top Four Cup and Accra Hearts of Oak has won it for three (3) times and was African Super Cup champion in 2001.

With all these wins, it is quite obvious that there is a lot more to do, now that the Ghana Premier league and other leagues are developing. Moreover, their closest rival, Ashanti Kotoko has remained a force to reckon with.  

The financial statement of the club showed impressive results for last year despite the bad performance in the league. Would this affect the IPO subscription in anyway? The shares of the club are to be traded in the OTC market and this could also affect the subscription of the IPO, meanwhile, lead brokers SAS Brokerage Services denies that.  The truth would be out after the offer ends on 29^th August, 2011. They ‘never say die until the bones are rotten’

History of Initial Public Offers (IPO) in the Ghanaian Capital Market.

Initial Public Offering which is popularly known as IPO comes about when companies issue new shares to the public to purchase as a source of raising capital. Ghana has a wonderful history of IPOs and since the inception of the Ghana Stock Exchange (GSE), there have been so many IPOs with an impressive performance in the market. Meanwhile others were just so bad and despite their impressive subscriptions, they traded badly on exchange.

On 12^th November, 1990, Accra Brewery Limited (ABL) made a provisional listing on the Ghana Stock Exchange, making it one of the earliest companies to be listed on the Ghana Stock Exchange. This company and others existed before the inceptions of the GSE Public Limited Liability Companies hence were initially given provisional listing status before the formal listing. ABL made its formal listing on 20^th December, 1991 (Source; GSE Research Dept.).

One IPO listing was by SPPC and this was from December to February 1992. Eight (8) million shares were offered but only 4.2 million shares were sold to raise an amount of 630 million old cedis (GHC 63,000). Mechanical LLoyd Company Ltd (MLC) also offered 11 million shares as IPO at 50 old cedis (0.05 pesewas) per share from December 1993 to February 1994 and only 9.36 million shares were sold which raised an amount of 468.16 million old cedis (GHC46,816). Looking at these historical trends, it is obvious that early IPOs were cheap but subscriptions were not impressive. In January 1995, HFC Bank stocks were oversubscribed when they made a placement.  Shares offered were 11.35 million at 100 old cedis (0.10 pesewas) and 13.10 million shares were sold to raise about 1,315.45 million old cedis (GHC 131,545). Most of the time, shares of this nature were patronized by foreigners because the investment community of Ghana was small by then. Aside the HFC placement, SSB (now known as SG-SSB) IPO in 1995 was also oversubscribed. Many companies like ALW, UTC, PZ, EIC, FML made primary issues which were not necessarily IPOs. In 2006, Ghana Commercial Bank (GCB) issued and IPO of 49.50 million shares but 68.44 million shares were subscribed. This oversubscription set the pace for most IPOs and the investment community of Ghana especially the youth, took advantage of them. Initial Public Offers of Camelot (CMLT), Produce Buying Company (PBC), Sam Wood Ltd (SWL), Cocoa Producing Company (CPC) followed and in 2004 alone, four (4) Companies (CLYD, BOPP, CAL & SPL) listed IPOs on the GSE. But how well do the trade on the Exchange?

About two year ago, Ecobank Transnational Incorporated (ETI) offered an IPO that was largely subscribed meanwhile these shares are facing liquidity problems as at now in the market. Share price of ETI has fallen below its IPO price and shareholders are not happy at all.  UT Bank entered the market with an IPO which was also oversubscribed but the question still remains, do IPOs perform well in the market. Shares of UT bank had so many problems when it started trading in the market but is currently bouncing back.

The most recent IPO issued in the market is the shares of Tullow Oil, just weeks ago and these were undersubscribed. Does it mean that the investment community is no longer having confidence in IPOs or it was due to the costly price of this particular offer? As an investor, you must find out because this can inform your investment decision.

Is Ghana Stock Exchange a company? Who owns it? What is it then?

Hello reader,
I decided to write this because of some questions posed to me by some followers of this blog and it is all about the Ghana Stock Exchange. "Is the Ghana Stock Exchange a company?" she asked, If it is a company then who owns it and what do they do? If not a company then what is it?
Just like a market for trading fish, tomatoes, yam and other products, the Ghana Stock Exchange is a platform for trading securities (shares, bonds, futures, etc). Sellers bring their products and buyers come to buy. But because there are a lot of sellers and buyers, they are represented on the Exchange by Licensed Dealing Members (LDMs), (what people called Brokerage Firms or brokers). This means as a buyer or a seller, you cannot go to the exchange to buy or sell yourself (although some do).
The Ghana Stock Exchange plays a major role in securities industry regulation and is thus classified as a Self- Regulatory Organization. With respect to its numerous responsibilities, it simply monitors trading. It has Directors just like a company but the Securities and Exchange Commission oversees its regulation by making sure they do what they are supposed to do in the market and what is appropriate under the Security Industry Law (SIL)- the principal regulator.
When Public Limited Liability Companies want to raise capital for their business, the list shares on the exchange (that is, allowing people to own part of their company), so when investors study the company and find that the company is good and strong among other factors, they contact their brokers for them to make the trade - money, for part of the company. That is what the Ghana Stock Exchange oversees; that the right amount is paid and the ownership rights of part of the company is transferred to the name of the buyer or investor (in form of shares).
Finally, the Ghana Stock Exchange is privately financed and managed with the budget mainly financed by its members (LDMs and Associates) and issuer companies.

Value Investing and its rewards on the Ghana Stock Exchange.

There are different kinds of stocks or shares of companies on the Ghana Stock Exchange and every investor has a purpose for investing with reference to individual risk preference and time horizon. An investor’s purpose for investing could be for growth or for income or value. Value investing is investing in stocks believed to be worth far more than their current prices rather than those that pay high dividends or seem likely to appreciate irrespective of underlying value. 

On the stock market, there are some stocks that are mispriced. Mispricing is calculated as the difference between the estimated intrinsic value and the market price of a stock. Intrinsic value of an asset, in this case stock, is the value of the asset given a hypothetically complete understanding of the asset’s investment characteristics.  Therefore when a stock is undervalued on the exchange, there is an investment opportunity and smart investors take advantage of that.

The Question then is, how do you know whether a stock is undervalued or not? This is where you need an expert to advice you. Knowing this involves a lot of factors and calculations. One must first valuate the stock using some figures on the financial statement of the company. Some industry experts say that, UT bank is currently undervalued on the stock market. They make their argument with respect to the potentials of the company and how low it is currently priced on the Stock market (0.33p, courtesy: GSE). One thing you should know is that, so many investors do these calculations and that informs their investments strategy. An advice to you is that, for an active strategy to be consistent and successful, the investor’s expectations must differ from consensus expectations and be, on average, correct as well.

Growth Stocks on the Ghana Stock Exchange

Growth stocks are stocks in a company that are growing fast and reinvesting their profits rather than paying high dividends. The share prices of such stocks grow and double or sometimes triple in days or months on the Exchange. Investors with the purpose of keeping their monies in the market for a longer time invests in this kind of securities to gain on their capital.
On the Ghana Stock Exchange for instance, shares of FML,EBG,FML,GCB,GGBL,SCB,TOTAL and UNIL are growth stocks since for the past five(5) to six(6)years their share prices have been increasing and profits are being reinvested. Standard Chartered Bank shares are currently priced in the Market at GHC 64.00 per share, meanwhile less than 3 years ago, this stock was priced than lower GHC 25.00 per share. This obvious is almost a triple jump in capital gain of the stock(SCB). Other growth stocks also perform really well on the GSE in terms of share prices.
One question is that, what is the benefit of investing in Growth stocks on the GSE? CAPITAL GAIN, is the answer. These stocks grow in share price because directors of such companies do not focus on only paying high dividends but rather reinvest the profits and in that case the company grows and investors build confidence in the stock hence invest. The demand of the stock on the market positively affect the prices of the shares on the market.
Growth investing is good and very rewarding but remember it requires time and patience. Keep investing and invest wisely.

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First Time Investors on Ghana Stock Exchange

In 2009, I bought my first stock as a first time investor which was an IPO of ETI. I bought 500 shares at 0.29 cents (about GHC 0.34) per share. I bought this stock without any market analysis but just out of desperation to own shares on the GSE. I must say that I was also happy for the fact that the dividends were paid in dollars and at that time, the dollar-cedi rate was in favor of the dollar.
This stock performed badly when it started trading and now it has fallen lower than half its initial share price.
One lesson from this investment is that, an investor should not to rush into investing but to study the market very well especially IPOs.
As an investor, one must consider so many factors before buying a stock or venturing in the capital market. The Ghanaian Capital market is becoming robust every single day and hence requires more attention and advice to invest and gain from it. Brokerage firms are sprouting from time to time and that means people in Ghana are now seeing the need to take the investment job serious hence the need for investment advisers. Competition is getting keen but the question is how prepared is the market for first time investors- those that know very little about investing. Is it true that the majority of investors on the exchange invest with their sentiments with very little or no investment advice?

How many investors understand the GSE Security Depository (GSD) System and know the investment laws enacted by the Security and Exchange Commission (SEC)? Answers to these questions should caution the Ghana Investment Promotion Centre (GIPC) to be more active. I entreat all first time investors to study the market or seek advice from experts (brokerage firms) before investing. You can make a lot of money in the stock market, just ask how?

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