Investors must take interest
in stock exchange
Moderate sale by Guinness Ghana Limited gives bourse some
life
Accra (Greater Accra) 15 October 2002 - The Ghana Stock Exchange (GSE) should be made to run strictly on business lines to enable it to perform its role on the financial market, Dr Sam Mensah, Chief Executive Officer of SEM Financial Services Ltd has strongly recommended.
He has therefore suggested that there is the urgent need to take a hard look at the various laws governing the operations of the exchange once declared a star performer on the African continent.
Existing laws and regulations that infringe on the growth of the market should be changed to enable the exchange to serve the purpose for which it was established, said Dr Mensah.
The GSE was set up in 1989 to serve as a vehicle for long-term funds mobilisation for the national economy. With nearly 13 years in operation, the exchange still has 22 listed companies with six registered corporate bonds and 17 government bonds.
Dr Mensah said areas that need immediate attention to make the exchange more productive include the governance, rules and procedure, trading and settlement and the overall constitution of the exchange.
Dr Mensah, who was reviewing the financial sector for the first three quarters of the year, said the concept that exchange is limited by guarantee should be changed.
He said it is time for the exchange to take a hard look at its activities and operations and be run as a profitable business, and this could be done according to Dr Mensah by changing the status of the exchange as a company limited by guarantee to that of the shares.
Dr Mensah stated that the structure of the exchange as it stands now is not the best as the board should consist of core participants or players of the market.
The 1990 listing and membership rules are still the same, despite the fact that many activities and events have taken place over the past 13 years on the local and international financial markets.
Existing laws and regulations that infringe on the growth of the market, he said, should be changed. Some of these laws include Bank of Ghana notice which imposes limits on holdings by non-resident foreign owners of listed companies and certain portions of the Companies Code of 1963, as well as rules and settlement of the exchange.
He said that take-over rules are outdated and that the stock exchange itself should consider reforms. “We are entering an era, where stock exchanges should have to reform itself to survive as an institution,” he declared.
Despite the short fall of the exchange in terms of governance, rules and regulations, Dr Mensah admitted that the exchange has done extremely well. He said the performance of the GSE from year to date has appreciated by more than 38 per cent, which is quite significant, compared to last year’s performance which stood at 16 per cent.
Treasury bills and other money instrument rates range between 25 and 30 per cent. Dr Mensah stated that the GSE out-performed inflation and the money market and that the performance of the exchange excludes that of dividend pay-out, and predicted that the market is likely to close at 50 per cent appreciation by the end of the fourth quarter.
He said that the turnaround of the economy as the result of the relative stability of interest rates, the downward movement of inflation boosted stock market activities and that gave some level of confidence to investors.
However, that is not the case in attracting more listings on the GSE. The only listing that was done for year was Sam Woode Limited.
He said the stock market is dependent on the private sector and that in a situation where the private sector is growing sluggishly, the market cannot be developed and cautioned that the market cannot be built on divestiture of state enterprises alone.
Dr Mensah said that by now significant large and high net worth companies should have been listed and pointed out that stock market activities are a reflection of the state of the private sector.
On money market activities, Dr Mensah said the performance of the Government of Ghana Index Limited Bonds (GGILBs) which commenced secondary trading on the exchange on December 28, last year, has been very disappointing. He said that apart from the banks that are holding the bonds as part of the secondary reserves, the public has shown very little interest.
“We are not investing in public education on financial market activities. Most retail investors are shying away from bonds,” he said.
He explained that the GGILBs give full protection against inflation and that it is a very sound instrument. However, he admitted that bonds, like the GGILBs, are very complex instruments.
He said for the bond market to thrive, government should invest more in educating people on bonds and stated that if the investing public really do not understand and appreciate the GGILBs, other bonds that will be introduced in the near future will suffer the same fate.
He disclosed that the National Bond Market Committee has finished with the first phase of its work and submitted it to the government.
He said the committee made comprehensive recommendation for overhauling the bond market and if they are implemented, one will see far-reaching changes in the securities market.
Dr Mensah said the second phase of the report talks about the issuing of corporate, agency and municipal bonds and prayed that the process should take off before the end of the fourth quarter.
GRi…/
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Accra (Greater Accra) 15 October 2002 - Frank D. Tweneboa, Managing Director of the Ghana Stock Exchange has said the lack of growth of the market is a matter of people not taking interest in stock market activities.
He said some people have simply closed their ears to numerous educational programmes that have been undertaken over the years.
Tweneboa, commenting on the general performance of the exchange as an institution, admitted that enough listings have not been done and this does not mean that the exchange is not growing.
The exchange registered a total market capitalisation of ¢3.6 trillion at the end of 2000 and closed the 2001 financial year at ¢3.9 trillion. The market capitalisation for the year to date stands nearly ¢4.1 trillion.
The GSE all share index, which is used to measure the growth and performance of the market, stood at 1,333.44 points at the close of business on Wednesday October 9. He said over the years the exchange has stepped up its public education programmes for the investing public to ensure that domestic demand for capital market securities is significantly enhanced.
Tweneboa, however, agreed to the fact that technological development is hampering the growth of the market and that the market cannot rely on manual work if it wants to grow at a much faster rate.
He said the exchange, as an institution, has identified the lack of modern automated trading and centralised clearing and settlement systems as a major factor hindering the development of the market.
He said the World Bank shelved a project to automate the exchange but that efforts are still being made to bring the modernisation of the market on stream.
He said the World Bank is supporting few business plans of the exchange and expressed the hope that the necessary financial support for the automation of the exchange will be obtained.
On the issue of the change in the structure of the exchange, Tweneboa said a proposal has once been made and said at the right time the change will be effected, adding that for now, the exchange will have to do with the present structure adding that there is a long-term plan for demutualising the exchange to improve upon corporate governance.
He said the exchange is committed to becoming the primary and more relevant vehicle for companies and government to raise long-term capital.
Tweneboa said the exchange will, therefore, do everything possible to penetrate the market, through marketing current products and offering quality and efficient services to attract listing and investment.
GRi…/
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Moderate
sale by Guinness Ghana Limited gives bourse some life
Accra (Greater Accra)
15 October 2002 - Moderate sales of shares of Guinness Ghana Limited on Monday
gave the Ghana Stock Exchange (GSE) some life as total shares traded climbed to
more than 240,000 from a mere 17,000 last Friday.
The GSE All-Share
Index saw only a 0.75-point increase as a 10-cedi loss by Produce Buying
Company (PBC), the sixth most capitalized equity affected gains by British
American Tobacco (BAT), Ghana Commercial bank (GCB) and Guinness Ghana Limited
(GGL).
The index, the main
gauge, was up at 1,336.94 points from 1,336.19 points. Change in the year to
date inched up to 39.61 from 39.54 per cent. Market capitalization slipped to
4,907.96 billion cedis from 4,909.42 billion cedis.
In the broader
market, there were four price changes - three positive and one negative. BAT
was up 29 cedis at 995 cedis, GGL gained 10 cedis at 950 and GCB managed one
cedi at 3,503 cedis. PBC lost 10 cedis at 390 cedis.
The following are the
last prices of listed equities in cedis:
ABL
380
AGC 18,807
ALW 4,000
BAT 995 +29
CFAO 67
EIC
4,520
FML
1,676
GBL 900
GCB 3,503 +1
GGL 950 +10
HFC 955
MGL 254
MLC 263
MOGL
19,720
PAF 750
PBC 390 -10
PZ 1,900
SCB 26,023
SPPC 387
SSB 3,950
SWL 285
UNIL 4,302
CMLT 460
GRi…/
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