The Ghana Stock Exchange (GSE) has called for a formalised forex trading platform that will see the local currency bought and sold in a much more transparent manner.
“Ghana should have a formal and centralised reporting framework for forex trading for better price discovery in foreign exchange market space,” Kofi Yamoah, Managing Director of the exchange, said at its 2018 stock market review in Accra.
He explained that before establishment of the Ghana Fixed Income Market (GFIM), which is a trading platform for bills and bonds (government and corporate), banks used to trade among themselves and there was not much transparency.
“Before GFIM the banks were trading fixed income securities, but they were trading bilaterally or one-on-one. With GFIM, all those deals being struck among banks are now known by all other market players, including the general public.
“This means that at any point in time, between bank A and bank B, there has been this transaction at this price and volume. This gives me an indication about how much these two are buying and selling,” he explained.
“We want something similar in the forex space, so that the cedi’s price against other trading currencies will be better discovered. If we do not do this, the prices at banks, forex bureaux and the black market have significant impact on the cedi – which hurts the economy in general,” he added.
Mr. Yamoah noted that even though the central bank states the price at which the cedi is trading against other currencies, it basically states the price at which the banks trade at the end of the day; but a forex trading platform will offer transparency and real-time reporting of trades and prices.
“What the central bank does is report transactions done by the various banks at the end of the day. What we are trying to advocate is something that is real-time so we do not wait till the end of day to know the price was,” he said.
Further advocacy by GSE
The GSE also urged government to allow listed companies pay less tax than the unlisted one. To Mr. Yamoah, this will urge more companies to go public. “Corporate Tax rates should see a differentiation between listed issuers and unlisted companies,” he said.
Also, he added that viable State Owned Enterprises (SOEs) should be encouraged and allowed to raise equity or debt securities based on their balance sheets to better pursue their mandate.
Stock market’s 2018 performance
With strong interest from corporates for the issuance of fixed income securities and rights and bonus issues by listed banks toward meeting the new GH¢400million capital requirement, the GSE Composite Index was flat at -0.29 percent with the financial index recording a loss of 6.79 percent as compared to positives of 52.73 percent and 49.51 percent respectively in 2017.
In 2018, the telecoms sector, for the first time, had a representation on the bourse with the listing of the biggest telecoms company MTN, while three non-performing equity securities were de-listed.
Outlook for 2019
The exchange, in 2019, seeks to support the Bank of Ghana, Central Securities Depository (CSD) and the Ministry of Finance and dealers in finalising work and implementing the Repurchase Agreement transactions on GFIM.
Also, the exchange will facilitate the introduction of securities lending and borrowing. Mr. Yamoah added that the GSE will work on the deployment of a mobile application for secondary trading of listed securities.
“Improve market compliance by dealers and issuers through the use of technology such as a reporting portal, and continue stakeholders’ engagements on GSE’s plans to demutualise in the short- to medium-term,” he added.