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Home Editorial/Features

Buying and Selling Bonds on the Capital Market in Ghana

November 23, 2020
in Editorial/Features, Investment, Opinion
0
Buying and Selling Bonds on the Capital Market in Ghana

Carl Odame-Gyenti, PhD is Finance and Telecom enthusiast, managing Banks and Non-Bank Financial Institutions, local and global Custodians, Trustees, Pension and Asset Managers, Insurance and Fintech relationships with an international Bank in Ghana.

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Recent reforms in the financial sector in Ghana which led to the revocation of the licenses of some commercial Banks, Savings and Loans, Microfinance Institutions has necessitated the need for potential investors to continue deepening their understanding of the financial industry. A recent publication by Business and Financial Times dated November 3, 2020 also made an important remark pointing to the fact that Fund Managers were losing clients to Banks.

In my view, empowering potential retail and corporate investors to understand the basics and necessary tools to the market in which they operate is the first step in helping them make the right choice and to obtain financial freedom. In my previous article published in Business and Financial times and myjoyonline.com dated June 2, 2020, I made  an  effort to demystify the concept of bonds, explained into detail how a class one child could even understand bonds, various types of bonds, risk and returns, various types of issuers and why the need for Governments, Corporates and Municipal authorities to raise funding through the capital market. I really found it intriguing the feedback received on the article which reached millions of people across the world. In view of that article, I received a lot of request from many people who are struggling to understand the requirements and even process involved in either buying or selling securities in Ghana. My focus in this piece is to delve into some steps in buying some of these financial securities. I may not be able to exhaust the entire process, but I am sure the highlights below may be beneficial.

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Visit a Commercial Bank or Broker Dealer

Purchasing treasuries on the primary and secondary market is done through any Ghanaian broker licensed by the Securities and Exchange Commission (SEC). Some of the major primary dealers and brokers include Databank, IC Securities, Strategic African Securities Ghana etc. Some commercial banks (the likes of Standard Chartered Bank) are licensed as dealers by the Bank of Ghana to actively trade bonds. Ghanaians and foreigners can actively own bonds. However, you must be a Ghanaian to purchase the shorter dated instruments thus Treasury Bills issued by the BoG. In this era of digitization and innovation, some banks like Standard Chartered Bank have placed these bonds and bills on their Mobile App to offer convenience and encourage clients to invest at any time.

Complete Central Securities Depository (CSD) Form

The next step is to complete and submit a CSD form with a passport picture and a copy of a valid identification card. A one-time unique number and account will be created to hold an investor’s local currency securities/portfolio thus Investment in T-bills and Bonds.

The CSD was established as a  specialist financial organization holding securities such as shares  in uncertificated (dematerialized) form so that ownership can be easily transferred through book entry form rather than the transfer of physical certificates. This allows individuals, institutions brokers and financial companies to hold their securities at one location where they can be available for clearing and settlement. This is usually done electronically, making it much faster and easier than was traditionally the case where physical certificates had to be exchanged after a trade had been completed.

In some cases, CSD may carry out centralized comparison, and transaction processing such as clearing and settlement of securities transfers, securities pledges, and securities freezes. It is important to note that, you don’t need to open multiple CSD numbers.

Risk Assessment

Every investor/individual needs to ascertain their risk appetite. This process is to determine one’s investment objective, capital preservation, preferred interest or gains, preferred tenor of investment, risk tolerance and how much of capital one may be willing to lose at early redemption or when market takes a nose dive. This largely applies to the potential investor who is actively trading on the secondary market. On the primary market, the assumptions are that due diligence will be done on the Issuer in other forms if the bonds are rated. If not rated, other risk assessment parameters are carefully assessed 

The above assessment will help narrow down on the specific bonds that suits one’s individual needs and objectives.

Complete Purchase Order Form

As an investor, you need to complete a purchase order form which basically details the bond of choice, your intended principal/face value or the settlement amount (thus the amount to be debited from your account). Ideally for those investors who are keen in know the returns on the bond purchased, the broker can assist with all the information’s relating to the transaction. Some banks provide notifications which details the expected returns.

Due to how often the Government of Ghana issues bonds and how vibrant the bond market is, we currently have over 30 bonds available to investors.

Security Description ISIN Coupon Maturity DTM BID PRICE ASK PRICE
GHGB 24 11/23/20 5YR GHGGOG041211 24.00% 11/23/2020 27    100.5235     100.5732
GHGB 24 ¾ 03/01/21 5YR GHGGOG041880 24.75% 3/1/2021 125    102.4017     102.6512
GHGB 16.5 03/22/21 3YR GHGGOG048935 16.50% 3/22/2021 146       99.8351     100.1139
GHGB 16.25 05/17/21 3YR GHGGOG049875 16.25% 5/17/2021 202       99.4911        99.8699
GHGB 24 ½ 06/21/21 5YR GHGGOG042631 24.50% 6/21/2021 237    104.0915     104.5545
GHGB 17 1/2 06/28/21 3YR GHGGOG050543 17.50% 6/28/2021 244    100.0097     100.4680
GHGB 24 ¾ 07/19/21 5YR GHGGOG042813 24.75% 7/19/2021 265    104.6695     105.1866
GHGB 18 07/26/21 3YR GHGGOG050980 18.00% 7/26/2021 272    100.3076     100.8171
GHGB 19 ½ 10/18/21 GHGGOG052275 19.50% 10/18/2021 356    101.6995     102.3574
GHGB 20 01/03/22 GHGGOG053463 20.00% 1/3/2022 433    101.6373     102.4231
GHGB 18 ¾ 01/24/22 5YR GHGGOG044074 18.75% 1/24/2022 454    100.3780     101.1905
GHGB 19.7 05/23/22 GHGGOG055500 19.70% 5/23/2022 573    101.5199     102.5222
GHGB 18 ¼ 07/25/22 5YR GHGGOG045980 18.25% 7/25/2022 636       99.3974     100.4797
GHGB 17.60 11/28/22 5YR GHGGOG047440 17.60% 11/28/2022 762       98.1101        99.3567
GHGB 20 3/4 01/16/23 3YR GHGGOG058330 20.75% 1/16/2023 811    102.4951     103.8409
GHGB 16.50 02/06/23 5YR GHGGOG048331 16.50% 2/6/2023 832       94.9299        96.2334
GHGB 20 3/4 03/06/23 3YR GHGGOG059114 20.75% 3/6/2023 860    102.2709     103.6756
GHGB 19 04/17/23 GHGGOG059494 19.00% 4/17/2023 902       99.1259     100.5514
GHGB 18.85 05/29/23 GHGGOG059890 18.85% 5/29/2023 944       98.7593     100.2355
GHGB 19 09/18/23 GHGGOG061151 19.00% 9/18/2023 1056       98.8596     100.4701
GHGB 19 ¾ 03/25/24 7YR GHGGOG044744 19.75% 3/25/2024 1245       99.3361     101.1473
GHGB 19 3/4 04/15/24 GHGGOG055062 19.75% 4/15/2024 1266       99.3707     101.2021
GHGB 19 1/2 07/08/24 GHGGOG056219 19.50% 7/8/2024 1350       98.3706     100.2751
GHGB 21 01/27/25 GHGGOG053935 21.00% 1/27/2025 1553    101.8088     103.9448
GHGB 21.7 03/17/25 GHGGOG059262 21.70% 3/17/2025 1602    103.7178     105.9213
GHGB 16.25 04/07/25 7YR GHGGOG049263 16.25% 4/7/2025 1623       88.1888        90.1748
GHGB 19 1/4 06/23/25 GHGGOG060195 19.25% 6/23/2025 1700       96.2516        98.4192
GHGB 19.85 10/13/25 GHGGOG061466 19.85% 10/13/2025 1812       98.0059     100.2839
GHGB 19 1/2 07/13/26 GHGGOG060427 19.50% 7/13/2026 2085       95.3291        98.5543
GHGB 19 11/02/26 10YR GHGGOG043563 19.00% 11/2/2026 2197       93.3054        96.5579
GHGB 20 08/09/27 GHGGOG060674 20.00% 8/9/2027 2477       94.9782        98.4463
GHGB 17 ½ 05/29/28 10YR GHGGOG050246 17.50% 5/29/2028 2771       85.4178        88.7822
GHGB 19.8 06/11/29 GHGGOG055922 19.80% 6/11/2029 3149       93.3408        97.1168
GHGB 19 ¾ 03/15/32 15YR GHGGOG044751 19.75% 3/15/2032 4157       92.1884        96.2462
GHGB 20 07/10/34 15YR GHGGOG056458 20.00% 7/10/2034 5004       88.9686        92.9066
GHGB 20.2 08/01/39 GHGGOG056763 20.20% 8/1/2039 6852       89.0545        93.1111
ESLAGH 19 10/23/24 7YR GHGESLA46972 19.00% 10/23/2024 1457       98.4717     100.2184
ESLAGH 19.50 10/27/27 10YR GHGESLA46980 19.50% 10/27/2027 2556       96.5900        99.2925

Exhibit 1: List of Bonds on the Ghanaian Market as at 28th November 2020

Minimum Amount Required

Most of the feedback I have received from potential investors relates to the amount required to invest in bonds. It is always interesting to know people`s perception about investment amount required to purchase some of these securities. The minimum purchase amount at issuance is usually Ghs50,000. However, some banks and brokerage firms are able to peg the minimum purchase to Ghs1,000 for retail clients. A case can be made of Standard Chartered Bank where retail clients can purchase bonds as low as Ghs1,000 on the SC Mobile App.

Top sum up, complex things can me made simpler if there is clear understanding about the requirement to undertake an investment. Take the initiative and begin to create wealth on the capital market. Speak to a professional investment adviser, bank, licensed broker and seek for proper guidance.

Thank you for reading.

Credit: Armah I.J Akotey (Databank Brokerage), Xorlali Torso, Miriam Amoako

Disclaimer: The views expressed are personal views and doesn’t represent that of the media house or institution the writer works.

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