GSE records best performance in two years to top Africa
The Ghana Stock Exchange (GSE) has registered its best record in two years thanks to a positive bounce in economic growth.
At the end of March 2021, the Year-To-Date return was 13.99%, the best since January 2018, when the Accra bourse gained 19.3%.
Investors gained a Year-To-Date return of 14.62% in dollar terms as the market capitalisation hit a whopping GHC 57,162.18.
It marks the end of the first quarter and one year since the COVID-19 struck the country, plummeting the Year-To-Date return of the GSE to a negative 4.32% in March 2020.
Despite the impact of the COVID-19 pandemic, the country’s macroeconomic indicators were positive. The outlook pointed to more gains after laying the 2020 elections to bed at the end of the year.
In addition to attractive stock prices and the strong growth of some listed individual companies, the GSE is now the interest of many investors.
MTN Ghana led the charge in driving the gains, recording a Year-To-Date increase of 32% in its share price.
The Financial Services Index (FSI), which had been the primary sector of the GSE, recorded a paltry growth of 3.7%.
MTN’s market capitalisation is more than GHC 10.45billion.
With trade volumes and value constituting more than 80% respectively, it has the largest influence on the market direction.
MTN Ghana opened the year at 54 pesewas per share but hit 85 pesewas on Friday, March 26.
The strong performance of MTN was due to increased revenue.
With data hitting peak demand due to a shift in many business operations online to minimize physical human interactions due to the pandemic, the biggest telecommunication cashed in massively in all revenue lines, including mobile money transactions.
GSE performance compared to peers
The GSE outperformed 15 other countries whose stocks were tracked by Databank Financial Services Limited.
The closest was South Africa’s Johannesburg Stock Exchange which gained 11.84%. Year-To-Date return.
The third was the Namibia Stock Exchange which rose by 9.71%. Year-To-Date return.
Bounce back of investor confidence
Commenting on the development, the GSE Managing Director, Mr Ekow Afedzie, was optimistic that the bullish trend would continue.
“The equity market is beginning to do well. We are seeing more volumes being traded indicating a restoration of confidence. Going forward, investors are beginning to have more confidence in the economy,” he told theghanareport.com’s David Apinga.
Analysts outlook positive
The Head of Research at Databank Alex Boahen and GSE Analyst William Mensa attributed the rush for stock purchases to low share prices.
Uncertainties due to little knowledge about COVID-19 and elections 2020 impacted the market, Mr Boahen noted.
But immediately after the poll results were announced, the market was bullish as it renewed the confidence in the market.
“The recovery started towards the end of 2020. Companies are trading much cheaper than what they are intrinsically worth, so astute investors are going in to pick these stocks,” Mr Mensa concurred.”
“The early birds are the ones responsible for the current rise in activities,” he pointed out.
According to the GSE rules, listed companies must file their audited financial statements by the end of the first quarter.
Both analysts believed that the firms’ financial reports would determine the quantum of growth in trade volumes after release.
But Mr Mensa was quick to point out that, “There is not a sustained heavy demand on the market from daily volumes traded.
“We will actually see the market picking up when the demand becomes widespread and sustained so that every day we have a lot of people trying to buy shares, but now it is big one-off transactions that are driving the market.”
He indicated that trading was still low except for a few significant transactions, particularly involving MTN and, to a lesser extent, some banks.
He observed that many people are still playing safe without totally feeling convinced that “we are out of the financial turmoil of banking crises, pandemic, etc., and investing more in government paper.”
This, he noted, would trigger more investments and a high return by the end of the year, adding that large investments in stocks by pension funds managers would convince him that the growth could be sustained in the next six months.
He is hoping to see a return of more foreign investors after capital flights before the elections.