Indigenous institutional asset manager, NDK Asset Management, has introduced the NDK Aggregate Bond Index (NDK-ABI) onto the Ghanaian market to provide information on secondary trading for publicly issued medium and long terms debt securities. The NDK-ABI, a broad based, market capitalization-weighted index, aims to track the pricing trend of these securities to provide investors, fund managers, trustees and other stakeholders a benchmark for such investments.
Securities in the index are weighted according to the market size of each bond type. The index is therefore not calculated by simply averaging the price movements of each bond; instead the calculation gives different emphasis or weighting to the different bonds.
This weighting is based on the market capitalization of the bond, which is the price of the bond in relation to the volume of bonds in issue or the total market value of all the bonds that are on issue. The larger a particular bond’s market capitalization, the greater the effect a change in price of that security will have on the Index. The index, the second to be issued in the country since 2006, captures all actively traded investment bonds including Government of Ghana treasury securities.
No private bond will be admitted on the Index and securities represented on the NDK-ABI should be denominated in Ghana cedis (GHS) or convertible into GHS at the prevailing interbank exchange rate on the day of admission. “The launch of the index is particularly crucial at this stage in the evolution of the Ghanaian financial market, especially as government is increasingly issuing bonds to raise much needed capital for infrastructural development,” Mr. Collins Appiah, Executive Director, Head of Asset Management at NDK Asset Management said.
Ghana’s secondary market in bonds is shallow but has, in recent times, been registering impressive activity.
“This half year to June, we registered more than 25,000 transactions valued at more than GHS 6.4 billion, with the three year bonds being the most liquid and the ones dominated by foreign investors,” disclosed Mr. Stephen Tetteh, CEO of the Central Securities Depository (CSD) which collaborates with NDK in the maintenance of the NDK-ABI.
First Deputy Governor of the Bank of Ghana, Mr. Millison Narh also noted the timely launch of the Index.
“For the first time, Ghana’s recently issued 10-year Eurobond, which raised US$1 billion from the global financial markets would be listed on the Ghana Stock Exchange,” Narh disclosed, expressing optimism that when that happened, the base for computing the NDK-ABI would be revised to reflect the trading in the Eurobond as well.
He noted that as a market for long-term savings, the country’s bond market can operate efficiently within the context of macroeconomic stability. Over the past year, the Ghanaian economy has been rocked by government overspending and compounded by a debilitating energy crisis from September 2012, agitations for higher utilities tariffs by service providers and continuing labour unrest.
Inflation moved up from 10.1 percent in January to 11.4 percent in June 2013, a marked deterioration from long spell of single digit inflation. The local currency however remained relatively stable, depreciating by 3.4 percent in the first half of the year compared to 17.4 percent depreciation in the same period of 2012. Inflows from cocoa loan syndication and the Eurobond, due in the second half of the year, are however expected to shore up gross international reserves and calm pressures in the foreign exchange markets.
The Bank of Ghana’s Monetary Policy Committee, at its July meeting, maintained its policy rate at 16 percent given its expectations of moderated risks to the inflation outlook.