Accra, June 20, GNA - Ghana's economy is expected to continue to be relatively stable during the 2007 fiscal year, as prices of petroleum products are expected to be adjusted to reflect changes on the world market.

However, inflation is expected to rise slightly to reflect increases in the prices of petroleum products and the general increase in the prices of goods and services, Mr Joseph Nketsiah, General Manager of the Home Finance Company's (HFC) Investment Services Limited, said on Wednesday in Accra.

He was delivering reports on last year's performance of the HFC's Equity and Unit Funds at the company's 14th Annual General Meeting. Mr Nketsiah cited the energy crisis as the main challenge that may distort the operational budgets of all businesses and industry if stringent measures were not taken to resolve it. "This will compound the problems as expensive alternative sources of energy are resorted to," he added.

Mr Nketsiah also noted that increases in fuel prices and the knock-on effect on general prices levels continued to threaten to the achievement of single-digit inflation. However, interest rates were expected to continue sliding downwards, with the equity market on the other hand continuing its upward movement throughout the year, he said. Giving an overview of the company's Equity Fund performance in 2006, he said after the HFC recovered from the 2005 bearish market conditions, the fund chalked appreciable gains as the Trust out-performed the Ghana Stock Exchange (GSE) All Share Index. He said the Trust's end of year yield which stood at 12.46 per cent was much better than the 4.97 per cent posted by the stock market for the same period.

Mr Nketsiah said in the company's desire to achieve the Trust's objective of delivering higher long-term returns and in line with the HFC's active investment management strategy, modifications were made to the investment strategy by reducing the Trust's stake in some of the slow performing equities in order to take advantage of some of the Initial Public Offers (IPOs) and other fast moving shares on the stock market.

However, since total disinvestment outweighed the cumulative figures for both new investments and additional investments, net asset value of the trust decreased from 6.90 billion cedis at the beginning of the year to 5.19 billion cedis, a reduction of 32.94 per cent at the close of the year under review.

He said the gradual but steady increase in share prices was an encouraging development, indicating that increases were sustainable and the outlook for the market in 2007 was good.

Mr Nketsiah said it was the expectation of the company that the modest performance of 2006 and early significant gains would serve as the foundation to build on during 2007.

On the performance of the company's Unit Trust, Mr Nketsiah said the overall decline in interest rates throughout 2006 necessitated intensified portfolio realigning efforts by replacing more of the short-dated instruments with long-dated ones.

He said, to help improve yield on the fund, the company increased the fund's participation in other non-government high-yielding fixed income instruments, which resulted in the fund growing steadily throughout 2006 to close at 8.71 per cent in December 2006, as against the 3.00 per cent recorded within the same period in 2005.

However, in spite of the upsurge in the fund's performance in 2006 over that of 2005, fund value fell by 17.6 per cent from 158.14 billion cedis in December 2005 to 130.21 billion cedis in December 2006. Mr Nketsiah attributed the fall in fund value mainly to huge disinvestments, owing to the number of unit fund holders falling slightly by 2.1 per cent from 12,954 in 2005 to 12,682 in 2006. He said in spite of the downward trend in interest rates, 2007 appeared promising for the Equity Fund, because it was on the threshold of outperforming the money market this year. "The full benefit of the portfolio realignment is expected to be realized." He assured shareholders of good yields on their investment this year.

Even though most shareholders did not raise objections to the various reports presented by the fund managers, some expressed dissatisfaction on the late notification of the AGM, calling on the HFC to reform its information dissemination system. Some complained that till date, they had not been given certificates to authenticate their ownership of shares in the funds, which the company promised to address.