Offshore investors show growing interest in Ghana’s local currency bonds
GCB Capital reports a notable uptick in offshore investor interest in Ghana’s local currency (LCY) bonds on the secondary market.
This emerging appetite, highlighted in GCB Capital’s February report, is seen as a speculative move amidst depressed prices, with investors eyeing potential price rebounds amid improving macroeconomic conditions.
Secondary Market Activity on the Rise
Until recently, secondary bond market activity was largely dominated by sell-buybacks and repo transactions, hampering effective price discovery.
However, recent weeks have witnessed a surge in trading activity, with investors now turning over an average of GH¢1.22 billion weekly.
Notably, the market recorded an aggregate volume of GH¢22.82 billion over the initial two months of 2024, with T-bills constituting nearly 70 percent of the total volume traded.
Potential for Bond Valuation Improvement
GCB Capital anticipates that two coupon payments without distress could trigger write-backs of significant impairments incurred in 2022, potentially leading to improved bond valuations.
Despite lingering default risks and refinancing challenges in 2027 and 2028, GCB Capital remains optimistic about the gradual enhancement of bond valuations, fueling activity in the secondary fixed-income market.
Outlook and Recommendations
While uncertainties persist, GCB Capital underscores the necessity for stricter fiscal discipline amidst fiscal, debt, and macroeconomic challenges.
The firm expects the IMF backstop to provide stability, urging fixed-income investors with a medium-to-long-term horizon to consider seizing opportunities amid improving bond valuations.
End-of-Month Portfolio Adjustment to Influence Bond Exchange
Market participants anticipate a favorable impact on bond exchange from the February 2024 end-of-month portfolio adjustment by pension fund managers, further indicating positive sentiments towards Ghana’s bond market outlook.
