Another day's heavy turnover brought the aggregate for the week to over 2.2m shares valued at over 3.2billion cedis. The GSE All-Share Index ended the week .48 points above its opening level at 818.68, the first time in a considerable period that it has risen in the course of a week.
Standard Chartered Bank gave up the 300 cedis gain made on Wednesday, closing back at 24,000 cedis on a parcel of just 200 shares. Further signs of improved sentiment surrounding SSB Ltd came with the traded of a bloc of 370,000 shares at 1650 cedis. SSB remains a constituent of the "optimism index", as bids exceeded offers by 389,400 to 371,500. Ghana Commercial Bank was also traded, a line of 13,700 shares passing through the market at 1000 cedis.
The progress of the GSE All-Share Index was ameliorated by a rise of 200 cedis in Mobil Oil of Ghana Ltd to 17,000. Once again, in this heavyweight stock, only 200 shares were traded.
Among the breweries, only Ghana Brewery Ltd was traded, 1100 shares unchanged at 1900 cedis. The Economist Intelligence Unit in its latest country report on Ghana states, in an otherwise excellent review of the financial sector, that GBL was the only issue to lose value last year. This ignores the 1 for 2 scrip issue related to the Acimota Brewing Co takeover. In fact, GBL appreciated by almost 50%. Accra Brewery Ltd and Guinness Ghana Ltd were not traded.
Another 200 share parcel was traded in Metalloplastica Ghana Ltd at 225 cedis. Aluworks Ltd was traded, 9500 shares at 2800 cedis, though heavy sell orders were recorded once again at 215,700 shares.
The total number of issues traded was 10 for a second session. The "optimism index" of issues where shares bid exceed shares offered fell back to 4, of which Fan Milk Ltd and SSB were traded. Unilever and GGL were the non-traded constituents.
The Unilever annual report has arrived at the offices of this column. Disconcertingly, the Board is proposing a share re-purchace scheme to permit them to "manage the share price to reflect the true performance of the Company". They point out that, during the past year the share price opened at 1100 cedis, peaking at 2600 in May, before falling back to 1300 cedis at the end of November. "Such fluctuations" they say "may have a negative impact on the image fo the Company and create the wrong impression of the underlying performance". This column will no doubt be howled down by the Board and officials of the Stock Exchange, but comments such as this reveal a fundamental incomprehension of the nature and workings of markets. J Perpoint-Morgan, the merchant banker and Wall Street operator at the start of the 20th Century, who single-handedly averted one Wall St crash in the early 1920s, was asked how share prices would move in the future. He replied "fluctuate". That is what they will do, and the more they fluctuate, the more traders will be attracted to the market in the hope of making a profit.
Under the Board's proposal, Unilever is committed to buying the shares when they are deemed to be "over-priced" and likely to fall, and selling the shares when they are "under-priced" and likely to rise. The Board are asking the shareholders to authorise a blank cheque to allow them to attempt to second-guess market operators. It lays the company wide open to green-mail operations, and is only likely to eat up the company's profits, making less available for distribution as dividends. Shareholders would be well advised to vote against this proposal in the form presented to the meeting.
Having said that, the report has a very excellent Value Added Statement, showing that the split of Value Added was 19.3% to employee remuneration, 57.5% in taxes, 16.4% to providers of capital, leaving only 6.8% to reinvestment.
Aggregate shares offered were slightly up at 3.2m, while bids rose sharply to just over 2m. Aggregate shares traded amounted to 1.17m, valued at over 1.5b cedis.
There are two issues here of course. Firstly the government take appears excessive. It may be a standard IMF panacea to propose a reduction of import duties, the problem for a government such as Ghana's is to find anything that stands still long enough to tax it. Companies such as Unilever are an easy target.
The second issue is that the level of reinvestment in the company is quite simply inadequate. Levels of reinvestment in "developed" economies are routinely 10% or more. For developing companies, the need to bring standards of manufacturing equipment, infrastructure etc up to modern levels demand higher levels of saving, of reinvestment.
There were no trades in the bond market.
