Falling Oil Lures Ghana’s NDK to Stocks Before IMF Deal

Plunging oil prices and a potential bailout from the International Monetary Fund are spurring Ghana’s NDK Asset Management Ltd. to buy more of the country’s stocks and less of its debt.

The investor, which has increased assets to 133 million cedis ($41 million) since starting operations in 2011, plans to boost investments in equities to 10 percent of assets this year from 6 percent in 2014, said John Ofosu Awuku, a money manager. Crude’s drop allowed the West African nation to cut gasoline costs 10 percent this month, alleviating pressure on inflation that in December held at the highest level since it was rebased in 2013.

“When the government decides to pass the reduction in crude prices to consumers, that should reduce inflation and if Bank of Ghana decides to respond, then interest rates will be coming down,” he said by phone from the capital, Accra, Tuesday. “If rates are coming down then people will be seeking to buy more stocks.”

The main stock index of the world’s second-largest cocoa producer rose 5.4 percent last year, the slowest pace in three years, as investors took shelter from surging prices in Treasury bills, which paid yields on 91-day notes of 25.8 percent at the latest auction on Jan. 16, the highest since October 2009. The Ghana Stock Exchange Composite Index lost 0.2 percent by the close in Accra. A deal with the IMF will restore confidence and lure foreign investors back to Ghana, helping to reverse the underperformance of the equity market, Awuku said.

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The government expects to sign a deal with the IMF by the end of February, Cassiel Ato Forson, deputy minister of finance, said Jan. 16. Ghana has said it wants as much as $1 billion from the IMF to help narrow a budget gap and support the cedi, the worst performer over the past 12 months among 24 African currencies tracked by Bloomberg. The cedi gained 0.1 percent to 3.2926 per dollar at 4:56 p.m. in Accra. Oil has slid more than 50 percent since June because of a supply glut.

Awuku said his investments returned 29 percent in 2014. His portfolio this year will also include 55 percent government debt, compared with 60 percent last year, while 35 percent will be devoted to instruments linked to Treasury bills and corporate bonds. NDK Asset Management was started after Ghana changed pension laws to curb the monopoly of the state retirement fund as a unit of NDK Financial Services Ltd., which began operations as a lender in 1991.

Ghana is battling chronic power cuts that are weighing on makers of goods from soap to food, making banks the top picks for NDK’s Awuku because they consume less energy. Ghana’s economy will expand 3.9 percent this year from an estimated 4.2 percent in 2014 and 7.3 percent a year earlier, according to the Finance Ministry and Ghana Statistical Service.

Shares in Fan Milk Ltd., which makes ice cream and juice, have dropped 22 percent in the past 12 months and traded unchanged at 5.25 cedis yesterday in Accra. Unilever NV’s Ghanaian unit is down 42 percent in the same period to 10.50 cedis. Standard Chartered Bank Ghana Ltd., the unit of the London-based lender, rose 33 percent since January 2014, while Ecobank Ghana Ltd. advanced 25 percent.

“Because of the power situation a lot of the manufacturing stocks are not doing well,” Awuku said. “The banking stocks are always churning out profit.”

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