It is observed that investors are adopting a cautious approach as we approach the presidential and parliamentary elections in December, 2024, reflecting concerns about potential market volatility.
Priority is being given to short-term investments, particularly in light of potential risks associated with the market environment. Indeed, IC Securities emphasised the need for caution and liquidity – highlighting election-related risks and the broader risk-off environment.
Consequently, the firm is focusing on short-term repos and fixed deposits with reputable banks, while keeping a close eye on interest rates and inflation trends. The firm’s emphasis on liquidity is a direct response to potential market uncertainties ahead of the elections.
The company also points to stability of interest rates, with yields for government bills remaining relatively unchanged. Currently, the 91-day and 182-day bills stand at approximately 24 percent and 26 percent respectively, while the 364-day bill is at about 27.9 percent.
Although inflation dropped faster than expected, by 80 basis points to 20.9 percent in July, the cedi continues to depreciate against the U.S. dollar – now trading at around GH¢16 on the retail market.
This, combined with steady yields, could influence Bank of Ghana (BoG) Monetary Policy Committee (MPC) decisions in coming months.
Therefore, IC Securities anticipates a possible rate cut by the MPC as global central banks are expected to pivot away from the rate-hike cycle soon. However, the firm cautions that any rate cut could put more pressure on the cedi, potentially weakening it further against the dollar.
The firm’s outlook on interest rates suggests that while a potential rate cut could push yields lower, it also presents an opportunity to lock-in higher yields for longer maturities.
However, IC Securities is maintaining its focus on shorter-term investments to protect against election-related risks, reflecting its caution regarding market uncertainties as elections approach.
Databank also echoed this sentiment by outlining a similarly cautious approach to navigating Ghana’s fixed-income market in second-half 2024.
Liquidity challenges in the market could persist – especially as commercial banks focus on balancing their reserves and managing systemic risks, says Databank’s report.
