Ms Ruth Ofori, Financial Market Analyst and the Chief Executive Officer (CEO) of Lolyfx LTD, has concurred with the finance minister of Ghana, Ken Ofori-Atta, noting that further delays in the country’s debt restructuring efforts could spell doom to the Ghana Stock Exchange as the stock market could be approaching meltdown.
Ms Ruth Ofori made this known in an interview with the Vaultz News, in reaction to the finance minister’s claim that the economy will crash if the current debt restructuring delays to March, 2023. According to the analyst, further delays could plunge the country into recession which will affect the stock market.
“Already, things are not looking good for the market. So, I agree with him [the finance minister] that further delays could be suicidal as the market could be approaching meltdown where investors will rush out of the market. The Ghanaian market drop continues to post weak results as against fairly good results from other markets in the sub region. We need a timely intervention because any further delay and we are thrown out of gear.”
Ms Ruth Ofori
That notwithstanding, the analyst urged investors not to leave the market as the market will experience the correction phase. Ms Ruth Ofori thus, suggested that investors can diversify their portfolios in order to balance their books.
“Even though the country could be approaching a 2007/2008-style market crash, worried investors shouldn’t abandon ship. Instead, they should jump on a ship (hypothetically speaking) and plant their money in lower equities or diversify their investments into other markets not hard hit, though the global economy is facing difficulties.
“The government is currently taking extraordinary measures just to keep the market afloat and prevent it from falling deeper. So, I will advise investors to continue to have faith and not panic as that will spell more doom for the market.”
Ms Ruth Ofori
Preparing for the Worst Outcome
Ms Ruth Ofori, moreover, advised spooked investors to be prepared for the worse outcome of the ongoing debt conversations. “They should consider creating a debt restructuring disaster emergency kit that includes high-quality stocks and bonds, denominated in foreign currencies,” she said.
“Even if the debt restructuring debates are resolved, it’s not a bad idea to have some investments in other markets just in case of upheaval. You diversify because the things you don’t expect end up biting you. Even without a meltdown, other equities in the sub region have relatively cheap valuations and also other currencies are doing better against the dollar than ours. So, it’s definitely not a bad idea whichever way you look at it.”
Ms Ruth Ofori
Though some equity investors may be getting their hopes up for an economic soft landing instead of a full-blown recession. The analyst continues to sound far less sanguine about the economy’s prospects.
Ms Ruth Ofori expects macroeconomic challenges to persist in 2023 and into the following year. “There’s a difficult economic environment with elevated inflation, depreciation of the cedi, high interest rates and high unemployment rates”.
“Crisis are always lurking in the financial markets. I’m worrying about a possible recession, rising interest rates, rampant inflation and the continuing economic effects of the war in Ukraine and the Covid-19 pandemic. Now, it’s time to add to that list the threat of a catastrophic failure of debt exchange program, which could conceivably come to pass. Even now, with the odds of an eventual crisis clearly rising, it is difficult to accept that it might really happen.
“Thinking about it doesn’t mean panicking. Even in a crisis, I buy and hold investments in the stock and bond markets, preferably through low-cost stocks. That’s a well-tested approach for long-term investment. It makes sense as long as you are able to withstand market turbulence and hang on for decades.”
Ms Ruth Ofori
Investors Risk Tolerance to Be Tested
The analyst indicated that investors’ risk tolerance will surely be tested later this year if the government exhausts the capabilities of its ‘extraordinary measures’.
“At this point, it seems a bit pollyannaish to think that the Ghanaian economy can avoid a recession entirely. After all, the Bank of Ghana aggressively jacked up interest rates through out last year and during the first Monetary Policy Committee meeting of this year in order to combat inflation… and the Central Bank is probably not done raising rates just yet either. We all hope the economy does not fall off the cliff. But there is still likely to be some pain in the sleeves of investors.”
Ms Ruth Ofori
It can be recalled that the finance minister towards the second half of last week, cautioned domestic bond holders to as a matter of urgency support government’s debt exchange program. He noted that any further delays could send the country into economic crisis which will be very devastating.
Some debt exchange program participants remain in deadlock as they continue to reject government’s haircut policy while blaming the government for the mess. Last week, pensioners led a demonstration, expressing their displeasure about the government’s intentions to rope them in. “I’m not going to take a haircut and I won’t encourage any Ghanaian to do so Whoever supports the haircut is automatic supporter of wastage,” said Sophia Akuffo- leader of the pensioners who picketed at the finance ministry.
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