Buying and selling bonds on the capital market

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Carl ODAME-GYENTI(PhD}

Recent reforms in the financial sector in Ghana which led to the revocation of the licenses of some commercial banks, savings and loans, microfinance institutions has necessitated the need for potential investors to continue deepening their understanding of the financial industry. A recent publication by Business and Financial Times dated November 3, 2020 also made an important remark pointing to the fact that fund managers were losing clients to banks.

In my view, empowering potential retail and corporate investors to understand the basics and necessary tools to the market in which they operate is the first step in helping them make the right choice and to obtain financial freedom.

In my previous article published in Business and Financial times and myjoyonline.com dated June 2, 2020, I made an effort to demystify the concept of bonds, explained into detail how a class one child could even understand bonds, various types of bonds, risk and returns, various types of issuers and why the need for governments, corporates and municipal authorities to raise funding through the capital market. I really found it intriguing the feedback received on the article which reached millions of people across the world.

In view of that article, I received a lot of request from many people who are struggling to understand the requirements and even process involved in either buying or selling securities in Ghana. My focus in this piece is to delve into some steps in buying some of these financial securities. I may not be able to exhaust the entire process, but I am sure the highlights below may be beneficial.

Visit a commercial bank or broker dealer

Purchasing treasuries on the primary and secondary market is done through any Ghanaian broker licensed by the Securities and Exchange Commission (SEC). Some of the major primary dealers and brokers include Databank, IC Securities, Strategic African Securities Ghana etc. Some commercial banks (the likes of Standard Chartered Bank) are licensed as dealers by the Bank of Ghana to actively trade bonds. Ghanaians and foreigners can actively own bonds.

However, you must be a Ghanaian to purchase the shorter dated instruments thus Treasury Bills issued by the BoG. In this era of digitization and innovation, some banks like Standard Chartered Bank have placed these bonds and bills on their Mobile App to offer convenience and encourage clients to invest at any time.

Complete Central Securities Depository (CSD) Form

The next step is to complete and submit a CSD form with a passport picture and a copy of a valid identification card. A one-time unique number and account will be created to hold an investor’s local currency securities/portfolio thus Investment in T-bills and Bonds.

The CSD was established as a  specialist financial organization holding securities such as shares  in uncertificated (dematerialized) form so that ownership can be easily transferred through book entry form rather than the transfer of physical certificates. This allows individuals, institutions brokers and financial companies to hold their securities at one location where they can be available for clearing and settlement. This is usually done electronically, making it much faster and easier than was traditionally the case where physical certificates had to be exchanged after a trade had been completed.

In some cases, CSD may carry out centralized comparison, and transaction processing such as clearing and settlement of securities transfers, securities pledges, and securities freezes. It is important to note that, you don’t need to open multiple CSD numbers.

Risk Assessment

Every investor/individual needs to ascertain their risk appetite. This process is to determine one’s investment objective, capital preservation, preferred interest or gains, preferred tenor of investment, risk tolerance and how much of capital one may be willing to lose at early redemption or when market takes a nose dive. This largely applies to the potential investor who is actively trading on the secondary market. On the primary market, the assumptions are that due diligence will be done on the Issuer in other forms if the bonds are rated. If not rated, other risk assessment parameters are carefully assessed

The above assessment will help narrow down on the specific bonds that suits one’s individual needs and objectives.

Complete Purchase Order Form

As an investor, you need to complete a purchase order form which basically details the bond of choice, your intended principal/face value or the settlement amount (thus the amount to be debited from your account). Ideally for those investors who are keen in know the returns on the bond purchased, the broker can assist with all the information’s relating to the transaction. Some banks provide notifications which details the expected returns.

Due to how often the Government of Ghana issues bonds and how vibrant the bond market is, we currently have over 30 bonds available to investors.

Security DescriptionISINCouponMaturityDTMBID PRICEASK PRICE
GHGB 24 11/23/20 5YRGHGGOG04121124.00%11/23/202027   100.5235    100.5732
GHGB 24 ¾ 03/01/21 5YRGHGGOG04188024.75%3/1/2021125   102.4017    102.6512
GHGB 16.5 03/22/21 3YRGHGGOG04893516.50%3/22/2021146      99.8351    100.1139
GHGB 16.25 05/17/21 3YRGHGGOG04987516.25%5/17/2021202      99.4911       99.8699
GHGB 24 ½ 06/21/21 5YRGHGGOG04263124.50%6/21/2021237   104.0915    104.5545
GHGB 17 1/2 06/28/21 3YRGHGGOG05054317.50%6/28/2021244   100.0097    100.4680
GHGB 24 ¾ 07/19/21 5YRGHGGOG04281324.75%7/19/2021265   104.6695    105.1866
GHGB 18 07/26/21 3YRGHGGOG05098018.00%7/26/2021272   100.3076    100.8171
GHGB 19 ½ 10/18/21GHGGOG05227519.50%10/18/2021356   101.6995    102.3574
GHGB 20 01/03/22GHGGOG05346320.00%1/3/2022433   101.6373    102.4231
GHGB 18 ¾ 01/24/22 5YRGHGGOG04407418.75%1/24/2022454   100.3780    101.1905
GHGB 19.7 05/23/22GHGGOG05550019.70%5/23/2022573   101.5199    102.5222
GHGB 18 ¼ 07/25/22 5YRGHGGOG04598018.25%7/25/2022636      99.3974    100.4797
GHGB 17.60 11/28/22 5YRGHGGOG04744017.60%11/28/2022762      98.1101       99.3567
GHGB 20 3/4 01/16/23 3YRGHGGOG05833020.75%1/16/2023811   102.4951    103.8409
GHGB 16.50 02/06/23 5YRGHGGOG04833116.50%2/6/2023832      94.9299       96.2334
GHGB 20 3/4 03/06/23 3YRGHGGOG05911420.75%3/6/2023860   102.2709    103.6756
GHGB 19 04/17/23GHGGOG05949419.00%4/17/2023902      99.1259    100.5514
GHGB 18.85 05/29/23GHGGOG05989018.85%5/29/2023944      98.7593    100.2355
GHGB 19 09/18/23GHGGOG06115119.00%9/18/20231056      98.8596    100.4701
GHGB 19 ¾ 03/25/24 7YRGHGGOG04474419.75%3/25/20241245      99.3361    101.1473
GHGB 19 3/4 04/15/24GHGGOG05506219.75%4/15/20241266      99.3707    101.2021
GHGB 19 1/2 07/08/24GHGGOG05621919.50%7/8/20241350      98.3706    100.2751
GHGB 21 01/27/25GHGGOG05393521.00%1/27/20251553   101.8088    103.9448
GHGB 21.7 03/17/25GHGGOG05926221.70%3/17/20251602   103.7178    105.9213
GHGB 16.25 04/07/25 7YRGHGGOG04926316.25%4/7/20251623      88.1888       90.1748
GHGB 19 1/4 06/23/25GHGGOG06019519.25%6/23/20251700      96.2516       98.4192
GHGB 19.85 10/13/25GHGGOG06146619.85%10/13/20251812      98.0059    100.2839
GHGB 19 1/2 07/13/26GHGGOG06042719.50%7/13/20262085      95.3291       98.5543
GHGB 19 11/02/26 10YRGHGGOG04356319.00%11/2/20262197      93.3054       96.5579
GHGB 20 08/09/27GHGGOG06067420.00%8/9/20272477      94.9782       98.4463
GHGB 17 ½ 05/29/28 10YRGHGGOG05024617.50%5/29/20282771      85.4178       88.7822
GHGB 19.8 06/11/29GHGGOG05592219.80%6/11/20293149      93.3408       97.1168
GHGB 19 ¾ 03/15/32 15YRGHGGOG04475119.75%3/15/20324157      92.1884       96.2462
GHGB 20 07/10/34 15YRGHGGOG05645820.00%7/10/20345004      88.9686       92.9066
GHGB 20.2 08/01/39GHGGOG05676320.20%8/1/20396852      89.0545       93.1111
ESLAGH 19 10/23/24 7YRGHGESLA4697219.00%10/23/20241457      98.4717    100.2184
ESLAGH 19.50 10/27/27 10YRGHGESLA4698019.50%10/27/20272556      96.5900       99.2925

Exhibit 1: List of Bonds on the Ghanaian Market as at 28th November 2020

Minimum amount required

Most of the feedback I have received from potential investors relates to the amount required to invest in bonds. It is always interesting to know people`s perception about investment amount required to purchase some of these securities. The minimum purchase amount at issuance is usually GH¢50,000.

However, some banks and brokerage firms are able to peg the minimum purchase to GH¢1,000 for retail clients. A case can be made of Standard Chartered Bank where retail clients can purchase bonds as low as GH¢1,000 on the SC Mobile App.

Top sum up, complex things can me made simpler if there is clear understanding about the requirement to undertake an investment. Take the initiative and begin to create wealth on the capital market. Speak to a professional investment adviser, bank, licensed broker and seek for proper guidance.

Thank you for reading.

Credit: Armah I.J Akotey (Databank Brokerage), Xorlali Torso, Miriam Amoako

Disclaimer: The views expressed are personal views and doesn’t represent that of the media house or institution the writer works.

About the Writer

Carl Odame-Gyenti, PhD is Finance and Telecom enthusiast, managing Banks and Non-Bank Financial Institutions, local and global Custodians, Trustees, Pension and Asset Managers, Insurance and Fintech relationships with an international Bank in Ghana. Contact:  [email protected], Cell: +233-200301110

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