Deputy Managing Director of the Ghana Stock Exchange, Abena Amoah, has revealed that the Ghana Fixed Income market (GFIM) has developed its first set of bond indices – ready to be launched by end of this year.
Financial indices are designed to provide investors with a way to reduce the complexity and increase the comprehensibility of financial markets. These indices have also been major catalysts for product innovation in the financial services space. Indexing on the bonds market will serve as a passive investment strategy for gaining targetted exposure to a specified market segment.
In an interview with B&FT, the Deputy MD said: “On the bonds market, we are looking to launch new indices; but first and foremost, we need to grow our critical number of issuers on the market,” Ms. Amoah said. “Now, we have nine corporate issuers on the bond market while we have 36 issuers on our two equities markets, which is 45 issuers in all. We have a target of 100 issuers on the market.”
Increasing the number of issuers on the market is expected to largely generate a lot of liquidity in Ghana’s financial market. Moreover, investing in a targetted segment of the market for capital appreciation or as a long-term investment can be expensive, given the trading costs associated with buying individual securities. Therefore, indexing serves as a popular option for many investors.
The GSE is in discussions with international partners to develop and launch global branded indices to attract more investors to indices on the market.
“We are looking to partner with global brands to develop and brand a new index for the market. We signed an MoU with the London Stock Exchange; among the key activities under this MoU are some of this type of service,” Miss Amoah said.
In the medium-term, the exchange in partnership with the State Interests and Governance Authority (SIGA) and Association of Ghana Industries (AGI) as well as other private Ghanaian companies; many of them mid-size like the Stanford Transformation Network (STN) Ghana, which has a network of over 100 medium-sized companies, that have over 100 employees each is expected to increase the number of issuers on the market.
“We have started engaging them [Stanford Transformation Network (STN) Ghana] to list about 20 to 25 of them on the stock market,” she said.