Ghana Stock Exchange (GSE) Stages Impressive Turnaround, Ranks Third-Best in Africa

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The Ghana Stock Exchange (GSE) has witnessed a remarkable transformation in its performance from the start of 2023 to the end of August, securing the position of the third-best performing stock market on the African continent.

This notable achievement positions it closely behind Nigeria and Egypt, signifying a substantial shift from its status as the worst-performing market in the region at the end of 2022. During that period, portfolio reversals, particularly by foreign investors, and the rapid depreciation of the cedi had a detrimental impact.

The Composite Index (GSE-CI) experienced a significant rally, reaching 3,084.79 points during this period, marking an impressive appreciation of 26.22 percent. The market capitalization surpassed GH¢73 billion.

This rally can be attributed to a renewed interest in the equities market, driven by developments in the debt segment. A clear indication of this renewed interest is the fact that pension funds accounted for 17 percent of equity market trades between January and August 2023, in stark contrast to the 4 percent recorded for the same period in 2022.

While the GSE remains on course to surpass market expectations, analysts stress that more efforts are needed to sustain growth, considering the cyclical ups and downs.

This achievement follows a period of volatility in the stock market, characterized by significant highs and steep declines. Analysts are closely monitoring the market’s performance as it navigates through challenging economic conditions, foreign investor sentiment, and policy changes.

In 2021, Ghanaian equities made a strong comeback, closely mirroring the country’s economic recovery after experiencing pandemic-induced losses in 2020. The GSE-CI recorded an impressive annual return of +43.66 percent in local currency terms, ranking second only to Zambia’s Lusaka Stock Exchange in Africa. This surge was attributed to increased consumer demand, a stable exchange rate, and robust corporate earnings across various sectors. However, the financial sector, including banking and insurance counters, lagged behind, with the GSE Financial Stock Index (GSE-FSI) returning +20.70 percent for the year.

Once again, the equity market faced adversity in 2022, emerging as the worst-performing stock market in the sub-region. Macroeconomic uncertainties, including currency pressures, high inflation, interest rate hikes, and sovereign credit downgrades, fueled a widespread sell-off. Foreign investors led the selling pressure, creating a predominantly buyers’ market. This trend resulted in lower share prices, presenting buying opportunities. Despite the turbulence, market turnover increased significantly to GH¢1.64 billion, driven by assets like the New Gold ETF, which attracted investors seeking refuge from inflation.

The market displayed signs of recovery in the first half of 2023. Investors began returning to equities due to concerns about the impact of the Domestic Debt Exchange Programme (DDEP) on the fixed-income market. The GSE-CI achieved impressive gains of 14.90 percent, outperforming the GSE-FSI, which fell by 17.57 percent. Key factors contributing to this recovery included easing price pressures, a stable currency, and optimism about economic recovery following the successful negotiation of a US$3 billion extended credit facility with the IMF.

Experts are closely monitoring the domestic stock market in the second half of 2023. Non-financial stocks are expected to continue leading the way, driven by strong demand. However, some profit-taking may occur as investors seek to secure their gains. Analysts have adjusted their year-end forecast for the GSE-CI to 15 percent (±300 basis points).

The announcement of a second wave of DDEP has raised concerns about its impact on financial stocks. As a result, income investors are likely to favor reliable, high dividend-paying, and defensive stocks such as Benso Oil, MTN, and TotalEnergies, which offer steady earnings and returns even during economic downturns.

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