Equity market rally masks deep concentration risks

The equity market delivered one of its strongest performances in recent history during 2025, capping a year that many investors saw as a turning point after prolonged macroeconomic strain and domestic debt restructuring.

The Ghana Stock Exchange benchmark index rose 79.4 percent to close at 8,770.25 points, its highest annual return since 2004.

Banking stocks led this advance with the Financial Stocks Index gaining 95.2 percent, reflecting a sharp re-rating of lenders and insurers as balance sheets stabilised and confidence gradually returned.

Trade values surged alongside prices. Equity transactions totalled about GH¢3.74billion in 2025 – nearly 74 percent higher than the previous year – while market capitalisation climbed 54.5 percent to roughly GH¢172billion by the end of December.

On the surface, these numbers pointed to a broad-based recovery and renewed investor appetite for Ghanaian assets.

A closer examination of market data however reveals a rally built on narrow foundations.

Trading activity was highly concentrated among a small group of custodians and driven by liquidity in just two sectors, raising questions about how resilient the market would be in the face of a sudden shock.

Custodian data from the exchange show that three institutions dominated equity trading throughout the year. Standard Chartered Bank, Stanbic Bank and Prudential Bank together accounted for about 77 percent of equity trades total value in 2025.

Standard Chartered alone handled just over 42 percent of traded value, equivalent to roughly GH¢1.38billion and close to 46 percent of total volumes.

Stanbic accounted for about 21 percent of value traded while Prudential handled about 14 percent.

All other custodians combined shared less than a quarter of market activity. Republic Bank, Ecobank and CAL Bank together accounted for about 16% of value traded, with the rest split among smaller players.

“The Ghana Stock Exchange exhibits a high degree of custodial and trading concentration,” Agbo said. “With more than three-quarters of equity transactions routed through three custodians, the market is exposed to single-point operational and settlement risk. From a portfolio construction standpoint, that materially increases liquidity risk premia – especially during periods of stress.”

He noted that any disruption affecting those custodians, whether operational, regulatory or reputational, could impair trade execution and settlement cycles, undermining price discovery and triggering abrupt valuation shifts even in fundamentally sound stocks.

“This is not a theoretical risk,” he said. “In a shallow market structure, localised disruptions can very quickly become market-wide liquidity events.”

The same pattern of concentration is evident when the market is viewed through a sectoral lens. Two sectors, ICT and food & beverages, accounted for more than 70 percent of total equity value traded in 2025. ICT stocks made up about 36 percent of traded value and nearly half of total volumes, while food & beverage counters contributed roughly 35 percent of value and a third of volumes.

By contrast, finance – despite delivering the year’s strongest price gains – accounted for less than 10 percent of total value traded. Other sectors central to Ghana’s real economy barely featured. Agriculture, mining and manufacturing together contributed less than 0.2 percent of total traded value, while insurance accounted for about 0.4 percent.

In practice, much of the ICT activity was concentrated in a single heavyweight stock, MTN Ghana, which remains the exchange’s most liquid counter and a key anchor for index-tracking and income-focused investors. Consumer staples stocks provided a second pool of liquidity, supported by relatively stable earnings and defensive appeal during a period of economic adjustment.

“The telecom segment effectively functions as the equity market’s primary liquidity anchor,” Agbo said. “Thais means sector-specific policy or regulatory changes are not contained within that sector. They transmit directly into market-wide liquidity and volatility.”

He added that regulatory or fiscal measures affecting telecom operators – such as additional levies, pricing controls or higher spectrum costs – could have systemic implications for the exchange, influencing index performance and investor sentiment well beyond the sector itself.

This structure raises several probing questions for investors: How diversified is a market wherein two sectors dominate liquidity? What happens to price discovery if the main liquidity anchor faces regulatory pressure? And how effective is diversification in a market where sector-specific risks can quickly become market-wide risks?

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