Constant rise in FSI level could trigger a rebound on GSE

The financial stock index [FSI], a key determinant of the daily market returns on the bourse has lagged behind the composite index for some time now on the bourse probably due to the sluggish performance of the banking and finance industry in Ghana.

The main contributors to the index level are listed banks on the stock market.

The FSI current level is at 1646.69 with a year-to-date change of -14.68% on the Ghana Stock Exchange (GSE).

The high NPL ratios, the increase in the Cost- to-Income ratios of most banks as well as the low turnout of profits from the banking sector has contributed significantly to the downturn of general returns on the equity market. Economic pressures and the issue of financial integrity may play a significant role in determining the future of the FSI level and the returns on market as a whole.

Market returns are currently in the negatives probably due to the fact that some financial institutions recorded poor results and in some cases losses in their books of accounts at the end of 2015.

Some key indicators such as the level of customer deposits, Profits-After-Tax [PAT] and Cost to income ratio determine the fundamentals of the banking sector.

Most listed financial equities such as Ecobank Transnational Incorporated [ETI], CAL, Ecobank Ghana [EGH] and GCB contribute significantly to liquidity on the bourse and price movements of financial stocks are significant in the attraction of foreign investors to the market.

Groupe Nduom (GN) Analysts posit that consistent improvement in the current level of the FSI will be a key driver to trigger a market rebound.

Trading activity on the bourse ended with 1 gainer [PZC] and 1 loser [BOPP] yesterday. ETI topped trading chart as 132,300 shares worth GHS 25,142.00 changed hands. Returns on the Composite and Financial Stock Index pegged at -12.20% and -14.68% respectively.

Activity on the Ghana Alternative Market (GAX) was hushed as no shares traded yesterday.

HORDS currently lead record capital gains on the GAX, appreciating by 25% from year open.

The Cedi lost to the Dollar and the Pound but gained to the Euro yesterday.

The local currency exchanged at a mid-rate of GHS 3.8402 to the USD, GHS 5.5423to the GBP and GHS 4.2646 to the EURO.

The GCFM Cedi index, a measure of the holistic performance of the Cedi on the interbank market now records a year-to-date depreciation of 1.40%.