Ghana’s capital market facing novel challenges amid economic crisis – Databank
Asset Management Firm, Databank, has described as novel, current challenges facing the country’s capital markets amid the prevailing economic crisis.
In a notice to customers on Monday, November 21 and in compliance to a directive from the Securities and Exchange Commission (SEC) on October 20, regarding the use of the mark-to-market value approach on investments, Databank said, “We recognize that we are in very challenging times, the likes of which Ghana’sFish capital market has not encountered before. We thank you for your patience and support, and encourage you to remain calm and stay invested.
“Databank remains committed to protecting your investments and will continue to act in your best interests at all times.”
The mark-to-market valuation method in the valuation of investment assets or portfolios, SEC notes, is to provide consistency in the valuation of assets and portfolios in the securities industry, ensure that the portfolios reflect market values, as well as protect investors, especially of Collective Investment Schemes (CIS).
Mark-to-market is a valuation approach where the value of a security in a portfolio reflects its current market price, and not the purchase price or face value. It, therefore, indicates how much you would receive if you sold the security on the market today.
A portfolio that is marking-to-market could see its price go up and down (i.e., experience volatility) based on market conditions.
For instance, a client bought 50 shares in a mutual fund at a share price of GHC 2 – translating into GHC 100.
If the client decides to withdraw today, she would receive an amount based on the share price for the day, and not the initial price she paid. If the current share price is GHC 1.50, she would get GHC 75. If the price, on the other hand, had rather increased to GHC 3, she would have gotten GHC 150.
According to Databank, given the mark-to-market valuation method directive from SEC, it will effective Monday, November 21, take the following measures;
- Withdrawals: All withdrawals will be calculated and processed using the mark-to-market price.
- Deposits: All new deposits will be invested at the current market price.
- Account balances. Going forward, you will be provided with two account balances that will reflect the following:
i) Amortized value: This reflects the current value of your investments in the Fund at face value.
ii) Market value: This reflects the current value of your investments in the fund (calculated at mark-to-market value) should you decide to redeem your funds.
