Ghana’s state pension fund plans to start selling some of its stock holdings to free up money for real-estate investments in a move that may reverse a slump in trading on the country’s bourse.
The Social Security and National Insurance Trust, which as the country’s biggest investor hasn’t bought or sold equities since early 2014, plans to start a trading desk amid criticism from the bourse it’s inhibiting liquidity. With the local-currency equivalent of about $1.7 billion under management, the fund is “working on the modalities” of setting up a hub, said Noel Addo, general manager for investment and development at the Accra-based money manager.
“Currently, if we want to execute any trade we do them through third parties,” Addo said by phone on May 19. “We want to play an active role by selling” some shares, he said. “The kind of volumes we hold, only a few parties can take it up.”
The Ghana Stock Exchange, which started in November 1990, has struggled to attract investors and listings with the trading volume falling 19 percent to 32.3 million in the first quarter from a year earlier, according to bourse data compiled by Bloomberg. That compared with Nigeria’s almost 28 billion trades in the period and Kenya’s 2.02 billion.
When major investors sit on securities, it makes it difficult for traders to price the shares in the market using typical demand and supply dynamics as a guide, said Kofi Yamoah, managing director of the Ghanaian bourse.
The fund “has holdings in all the good stocks, but because they are always doing buy and hold they are not getting price discovery for what they are holding,” he said in an interview this month. “You don’t just get up and exit one day when price really hasn’t been discovered.”
The stock market is also struggling to compete against assets such as Treasury bills that are offering higher returns, Yamoah said. Yields on 91-day notes rose 107 basis points over the past 12 months to 25.15 percent on May 22.
The GSE’s Composite Index advanced 4.5 percent this year, with a market value of 66.6 billion cedis ($16 billion). The pension fund has investments in 13 of the gauge’s 35 members, according to data compiled by Bloomberg. The index was little changed at 2,362.25 at 3:03 p.m. in Accra.
That includes GCB Bank Ltd., the third-biggest lender by index weight, in which the fund holds 29.8 percent. GCB’s stock is down 2.6 percent this year. The fund has 14.3 percent of Standard Chartered Plc’s local unit, 11 percent of Diageo Plc’s branch and 38.1 percent of Produce Buying Co., Ghana’s largest purchaser of cocoa beans from farmers. Shares in Guinness Ghana Breweries Ltd. and PBC are unchanged since January.
With the pension fund’s own desk, they may “trade a little more frequently as opposed to trading through a third-party brokerage house,” Doris Yaa Aggrey Ahiati, head of research at Databank Group Ltd., an Accra-based money manager, said by phone on May 22.
The pension fund is looking into the regulatory approval needed to set up the trading desk and the fees it will need to pay, Addo said. At least 40 percent of its assets are invested in listed stocks, and banks make up 70 percent of that, he said. The target is to reduce the share of financial equities to 50 percent within five years and use the cash to boost its real-estate holdings to 25 percent from 14 percent now, he said.
A more active pension fund “should put average daily or monthly volume up,” Databank’s Ahiati said. “Liquidity is a signal of attracting bigger investors.”