Capital market remains upbeat about equities

Capital market participants remain confident that the equities space will maintain its recovery throughout 2023, following its performance in the first accounting period of the year.

The market, as measured by the Ghana Stock Exchange Composite Index (GSE-CI), closed the quarter strongly with 2,745.33 points – its highest since January 2022 and in the process returning 12.9 percent to investors, compared to the -12.38 percent at beginning of the quarter.

Commenting on the subject, Head of Treasury at Access Bank, Franklin Ayensu-Nyarko, said a key takeaway from current happenings in the broader capital markets is the need for diversification. He noted that being the closest alternative to fixed-income securities coupled with the comparatively high level of liquidity and low entry cost, the equities market was bound to benefit the most.

“Investors are increasingly becoming aware that they need to diversify their portfolios, as we have seen first-hand that every asset class comes with a degree of risk. Equities remain top of the list because they are well-known, and the minimum amount required to invest in them is small compared to other alternative investments such as real estate,” he said.

The market has been propelled by stocks from three sectors – ICT/telecommunication (MTN), oil marketing (Total) and manufacturing (Benso Oil) and a late push by Unilever.

By the end of March, MTN’s stock had risen by 43.2 percent to GH¢1.25 from its starting price of GH¢0.88, making it the third-best performing stock on the GSE for the year. Over the last four weeks, the stock gained 35 percent – topping all other stocks on the GSE during that time.

According to official data, MTN Ghana had the most active trading volume of any stock on the GSE over the past three months, with a total volume of 171 million shares valued at GH¢156million and averaging 2.71 million traded shares per session.

TotalEnergies began the year with a share price of GH¢4 and ended March with a 59.8 percent increase in valuation to GH¢6.39; making it the second-best performing company on the GSE for YtD performance. Additionally, the stock increased by 28 percent over the past four weeks, placing it fourth among all companies on the GSE.

Benso Oil started the year at GH¢7.65 per share and has seen a 67.7 percent increase in valuation, making it the best-performing company on the GSE since beginning of the year.

Unilever’s share price has risen by 94 percent from GH¢2.06 in mid-February to GH¢4 at the end of March, marking a resurgence for the manufacturing giant.

On the downside, Ghana Breweries and Fan Milk had returns of -27 percent and -57 percent, respectively, while financial sector stocks CAL and Societe Generale banks had returns of -23 percent and -38 percent for the period.

According to the Executive Director at the Young Investors Network (YIN), Kofi Busia Kyei, the stock market’s performance during the first quarter has been impressive – especially given the general economic conditions.

However, he expects some moderation in momentum as the year progresses because the market-leading stocks have already reached, and even exceeded, their value targets for the year.

“Most of these stocks have already reached and even beaten the value targets for the year, so investors might apply some degree of caution,” he said, adding that positive first-quarter results will attract investors back to these stocks.

Despite the broader market’s positive performance, investors have continued to stay away from financial stocks – resulting in an 11.98 percent drop in the GSE-Financial Stocks Index (GSE-FSI) since beginning of the year to 1,806.67 points. However, Mr. Kyei believes the GSE- CI will end the year on a positive note since activity in the bond market remains subdued.

“We are yet to see the debt exchange’s full impact on financial firms. Hopefully, when we do we will see more activity with financial stocks; but that might be beyond the third quarter,” Mr. Kyei added.