Broker-Dealer Assets Hit GH¢887.8M in Q3

The Ghanaian capital market is showcasing a great strength, with the latest report released showing that broker-dealer assets have reached an impressive GH¢887.8 million as of the third quarter of 2024.

This represents a 118% increase compared to GH¢406 million recorded during the same period in 2023, a significant feat amid lingering economic challenges.

Ms. Gifty Annor-Sika Asantewah, a Financial Market Analyst and the President of Women In Forex Ghana, while reacting to the development in an interview attributed this growth to the market’s adaptability, regulatory measures, and investment strategies.

“Broker-dealers have been at the forefront of the market’s recovery, providing critical support to investors and facilitating trading activities. Their ability to adapt to changes in market structure, such as those introduced by the DDEP, has been instrumental in maintaining liquidity and promoting investor confidence. The doubling of broker-dealer assets within a year shows that the market has adapted to the new reality of the current economic climate. By efficiently managing risks and leveraging regulatory support, broker-dealers are driving the growth and stability of Ghana’s financial sector” she said.

Meanwhile, the Domestic Debt Exchange Programme (DDEP) has reshaped Ghana’s financial system, significantly influencing the country’s capital markets. As of the third quarter of 2024, restructured DDEP bonds reached an estimated GH¢82.9 billion, reflecting the magnitude of the initiative in addressing Ghana’s debt sustainability challenges.

Decline to Recovery

However, Ms Annor-Sika indicated that the ripple effects on trading activities, particularly on the Ghana Fixed Income Market, have been both profound and transformative.

“As a result of the the DDEP, trading activities on the Ghana Fixed Income Market (GFIM) declined sharply due to reduced tradability of restructured securities and liquidity constraints. Government of Ghana instruments, which traditionally dominated trading volumes, also saw reduced activity.”

Ms Sika-Annor iterated that the DDEP’s introduction created immediate challenges for market participants.

“The restructured bonds, with longer maturities and lower yields, were less attractive to investors seeking short-term returns. This shift caused a significant drop in the trading of Government of Ghana instruments, historically considered a cornerstone of the fixed-income market,” she stated.

However, Ms Annor Sika stated that as the market adjusted to the new reality, trading activities in 2024 showed signs of improvement. According to her, efforts to rebuild investor confidence and adapt to the restructured debt environment have been gradually bearing fruit.

Mitigating Risks

The analyst thus in view of the challenges, credited authorities for some of the strategies interventions implemented to mitigate risks and foster growth in the capital market.

“Enhanced investor education has been crucial, with a focus on promoting long-term investment strategies to stabilize the market. Fund managers have been encouraged to restructure portfolios to align with the evolving financial market and create buffer against emerging risks such as liquidity constraints.

“Additionally, the government’s GH¢1.5 billion bailout package for customers of revoked fund management companies has played also a critical role in rebuilding trust. By addressing past financial losses, this initiative has contributed to the gradual restoration of confidence in Ghana’s capital market. This initiative aims to address the lingering effects of the financial sector clean-up, which saw the closure of several fund management firms. While this intervention has provided relief to affected customers, there is the need for robust regulatory frameworks to prevent future crises” she added.

Ms. Gifty Annor-Sika Asantewah

Ms Annor-Sika stated that the Ghanaian capital market is on a steady path to recovery, with key indicators such as broker-dealer assets and AUM showing positive growth.

“However, challenges remain, including the reduced tradability of restructured securities and liquidity issues. Addressing these will require sustained efforts from the SEC, market participants, and policymakers.”

“The SEC’s focus on investor education and portfolio restructuring is a step in the right direction. By encouraging a long-term view of investments, these measures aim to create a more resilient and robust market environment. While challenges persist, the market’s ability to recover and grow amidst economic disruptions is commendable. As authorities continue to address liquidity constraints and enhance market stability, the future of Ghana’s financial sector appears promising.”

She noted that the efforts of broker-dealers, combined with regulatory support and investor confidence, will be crucial in sustaining current growth and ensuring a stable and vibrant capital market.