GSE MD predicts bullish market
Excitement is returning to the Ghana Stock Exchange (GSE) as the market has started showing signs of growth after recording poor performances in 2015 and 2016.
The market, in the first quarter of this year, recorded a growth of 10.42 per cent in its composite index, as against the negative 4.16 recorded in the first quarter of 2016.
The Managing Director of GSE, Mr Kofi Yamoah, told the GRAPHIC BUSINESS on May 10 that it was confident of a rebound of the market this year due to the new growth trend.
“This is essentially on the back of the fact that the companies on the market have started showing signs of a strong comeback this year after muted performances in 2015 and 2016,” he stated.
“We have seen it across the banks, we have seen it across our manufacturing sectors and so based on this, we expect that faith in the market will continue to grow this year,” he noted.
Mr Yamoah was confident the downward trend in inflation and interest rates would also revive interest in the capital market, “and that is what we are beginning to see now.”
He also mentioned that 2016 being an election year, lots of non-resident investors sat on the fence, adopting a ‘wait-and-see’ attitude which affected the market.
“With the elections now over, many of these non-resident investors are looking at this market with great interest,” he pointed out.
“We, therefore, expect that the aggregate of these factors will mean 2017 will turn out to be positive as we have seen in the first quarter,” he added.
Market improving
The Head of Research at FirstBanc Financial Services, Mr Benjamin Amoah-Adjei, speaking in an interview with the GRAPHIC BUSINESS on May 12, said the poor performance in 2016 was due to the challenges in the banking sector due to the issues with the BDCs and the VRA, coupled with the challenges of the manufacturing sector as a result of the unstable power and the depreciating cedi.
He said this led to the price decline of the banks and manufacturing companies on the market.
“At that time too, interest rates on the fixed income market were quite high and was in excess of 20 per cent, which meant that it was unreasonable for anybody to put their monies in the stock market as compared to the fixed market because there were higher returns there,” he mentioned.
He said the market, however, started improving in December after the election and one of the reasons was that at that time, interest rates on the fixed income had started declining partly because of lower inflation.
“Because people were expecting that interest rates will drop further, it informed some of the fund managers and investors to move their monies into the stock market and that was what generated the activities that we saw in the stock market,” he explained.
Growth sustainability
Mr Amoah-Adjei said even though the composite index grew by 10.4 per cent, it did not reflect the general performance of all the companies on the exchange.
He said the market had been driven by specific companies who had been able to turn their fortunes around after a difficult 2016 and were now doing well on the exchange.
“This is, however, a sustainable rally because if these companies continue to do well, we expect the market to perform the way it is now till the end of the year,” he stated.
“Barring any last minute challenges, we expect that this growth should be sustainable and we are very confident that it will,” he added.
He, however, added that the market performed badly last year.
Impact on the economy
The research analyst also pointed out that the growing activities on the market were good for the exchange because investors liked to see activities on the market.
“When people buy shares, they want to know that at a point in time when they want to sell these shares, there will be enough liquidity for them to be able to offload the shares. If there is activity, it attracts foreign investors and institutional investors who buy huge amounts of shares,” he indicated.
“The activity on the market now is, therefore, good because it brings the confidence that people can trade shares more quickly than they used to in 2015 and 2016,” he added.
Mr Benjamin Amoah-Adjei, however, said unlike the USA, the country’s stock market was not a strong indicator of the economy.
“The stock market doesn’t really influence the economy directly. It has very little impact on the economy. It is the investors who have taken the risk to invest in it that will benefit from this more,” he noted.