A financial and market expert, Ms Gifty Annor-Sika Asantewah, has lauded the Ghana Stock Exchange’s decision to create its own rating agency, while describing the move as “a step in the right direction.”
Ms Annor-Sika made this known in an exclusive interview with the Vaultz News in reaction to the GSE’s plan of having its own credit rating agency for listed stocks. She indicated that when the plan is achieved, it will serve as a benchmark for financial market regulations.
“The decision is positive and welcoming news for the Ghana Stock Market because investors rely on the ratings given by the credit rating agencies to make investment decisions.
“The ratings are used in structured finance transactions such as asset-backed securities, mortgage-backed securities, and collateralized debt obligations. Rating agencies focus on the type of pool underlying the security and the proposed capital structure to rate structured financial products. So, the move is apt, long overdue, and a step in the right direction.”
Ms Annor-Sika
Ms Annor-Sika is therefore, positive on the prospects of GSE Ratings as she noted that many countries sell their securities on the international market, and a good credit rating can help them access high-value investors. She added that a favorable rating may also attract other forms of investments like foreign direct investments to a country.
“With tighter regulations, differentiation between rating agencies is gradually coming to the fore and pedigreed players will benefit a lot.”
Ms Annor-Sika
How The Rating Agencies Works
Explaining how the Ghana Stock Exchange credit rating agency will work, the analyst averred that credit rating agencies analyse an organisation, individual, or entity and assign ratings to it. As such, she noted that the various companies listed on the stock market will be analyzed by the yet to be created rating agency and a value will be attached to them to inform investors.
“…These agencies have the authority to rate companies, state governments, non-profit organisations, countries, securities, local government bodies, and special purpose entities.
“Rating agencies focus on the type of pool underlying the security and the proposed capital structure to rate structured financial products.”
Ms Annor-Sika
Advantages of GSE Having Its Rating Agency
Ms Annor-Sika highlighted some advantages of the Ghana Stock Exchange having its own rating agency. She stated that the move will help to give a complete information on listed stocks which is laudable, given the impartiality in valuing of stocks.
“The exchange has rules and regulations that govern the transactions and check players in the industry, as such, prudential and compliance levels would be heightened to protect investors… Fair price for stocks and other securities will be achieved. Market players also stand to get fair and timely information on listings.”
Ms Annor-Sika
The analyst added that the stock market will gain investor confidence back.
“The stock market stands to gain confidence in the local stocks as the measure will tend to filter and fizzle out all bad nuts.”
Ms Annor-Sika
It can be recalled that Ekow Afedzie, Managing Director of the Ghana Stock Exchange (GSE), hinted of plans by the Exchange to create its own rating agency for listed stocks on the local bourse.
“As part of efforts to boost the credibility of the stock market, the Ghana Stock Exchange will soon conclude processes for the establishment of an investor credit rating agency for players on the market.”
Ekow Afedzie
According to the managers of the Stock Market, the domestic credit rating agency, which will be created by the end of the year, is to rate the issuances of investors in the market.
Conclusively, Ms Annor-Sika is “hopeful this [plans of establishing the GSE credit rating] materializes sooner than later.”
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