Capital market turns defensive ahead of 2027 Budget

Ghana’s equity and secondary fixed-income markets are showing signs of investor caution ahead of the presentation of the 2027 Budget, with declining share prices and subdued daily trading activity suggesting that market participants are postponing significant portfolio adjustments until the Government’s fiscal and economic priorities become clearer.

Although demand for government securities remains strong in the primary market, the performance of the Ghana Stock Exchange (GSE) and trading patterns on the Ghana Fixed Income Market (GFIM) point to a more restrained investment environment.

The caution comes as investors assess whether the Government can sustain the gains from macroeconomic stabilisation while financing its ambition of accelerating productive-sector investment and employment creation without compromising fiscal discipline.

On the equities market, the GSE Composite Index closed at 14,112.83 on November 4 before declining to 13,966.79 the following day and recovering marginally to 14,000.37 on November 6, this year.

Despite Friday’s recovery, the benchmark ended the week approximately 2.11 per cent below its October-end level of 14,302.27. The Financial Stocks Index followed a similar direction, closing at 7,269.22 on November 6 compared with 7,388.15 at the end of October. The market’s total capitalisation also declined from GH¢268.15 billion at October-end to GH¢263.27 billion, representing a reduction of GH¢4.88 billion.

Trading activity has weakened considerably on a daily basis.

The exchange recorded turnover of GH¢11.04 million on November 4, GH¢6.96 million on November 5 and approximately GH¢6.32 million on November 6. The resulting average of approximately GH¢8.1 million per session is substantially below October’s average daily equity turnover of approximately GH¢15 million, based on 23 trading sessions.

However, the broader weekly picture provides a qualification to the apparent slowdown. Reported turnover for the week ended November 6 increased by 23 per cent to GH¢69.61 million, suggesting that investors have not entirely withdrawn from the market.

Rather, the combination of a declining benchmark and weaker daily trading values indicates a market in which investors may be becoming more selective about new commitments.

The secondary fixed-income market is also experiencing reduced turnover.

GFIM recorded GH¢1.44 billion in transactions on November 4, GH¢958.30 million on November 5 and approximately GH¢1.20 billion on November 6.

The November 6 activity was dominated by Domestic Debt Exchange Programme bonds, which accounted for GH¢682.01 million, and Treasury bills, which contributed GH¢503.25 million.

Corporate bonds recorded just GH¢5.78 million, while commercial paper contributed GH¢2.02 million.

The three sessions averaged approximately GH¢1.20 billion in daily transactions, compared with an estimated GH¢2.1 billion daily average in October, when total trading reached GH¢48.13 billion.

Tesah Capital Research separately reported a 43.7 per cent contraction in secondary fixed-income trading over the latest comparison week.

The subdued activity suggests that market participants are becoming less willing to trade existing holdings aggressively before gaining a clearer understanding of the Government’s borrowing and refinancing requirements.

The foreign-exchange market has, meanwhile, remained relatively stable in the immediate run-up to the Budget.

Bank of Ghana figures put the interbank dollar rate at GH¢11.64 on November 6, compared with GH¢11.66 the previous day. Retail forex reporting, however, indicated a selling rate of approximately GH¢12.25.

The marginal interbank appreciation suggests that the approaching fiscal announcement has not yet triggered a pronounced exchange-market reaction.

Nevertheless, investors will be monitoring the implications of the 2027 financing programme for domestic liquidity, foreign-exchange demand and the sustainability of the cedi’s recent performance.

Finance Minister Dr Cassiel Ato Forson’s November 12 presentation is therefore expected to provide important signals for investment decisions across the capital market.

Investors will scrutinise the fiscal deficit, domestic borrowing requirements, revenue mobilisation measures, expenditure priorities and debt-service commitments.

They will also assess the consistency of the proposed fiscal programme with Ghana’s IMF-supported Policy Coordination Instrument and the country’s broader macroeconomic stabilisation objectives.

Ultimately, the Government’s ability to balance growth ambitions with credible financing arrangements will be central to restoring stronger trading activity and sustaining investor confidence in Ghana’s capital markets.