Trading activities on the main market of the Ghana Stock Exchange (GSE) saw a significant month-on-month turnaround in May, as value and volume of shares traded reached its highest and second highest points for the year respectively, with 58.9 million shares, valued at GH¢72.7 million, changing hands.
This comes after the market recorded a dip for the month of April, as the volume of traded stocks dropped by 48.40%, with a corresponding 36% plunge in value from the previous month.
The bullish performance, which was attributed to investor confidence off the back of the first quarter results and consequent share price gains of financial stocks from GCB bank, SG bank, Standard Chartered bank, Enterprise Insurance as well as GOIL, meant volume and value traded were 97.92 and 133.9% higher than the 29.77 million and GH¢31.09 million recorded in March.
Despite the GSE Composite Index (GSE-CI) losing 140.34 points to close the month at 2,421.11, representing a 5.48% depreciation, with market capitalisation also falling by 2.42%, the CI and Market Cap. were 24.73% and 10.81% better than they were during the comparable period last year.
Local vs. Foreign Investors
Offering insight into the reason for the sharp pendulum-swinging in the equities market, investment analyst at Nimed Capital, Joshua Adagbe suggested that it is largely as a result of the contrasting investment approaches taken by foreign-based and local retail investors.
He cited the capital gain and dividend reparations by foreign investors for the April slump. He added that this is because, despite constituting a smaller number of investors on the GSE, in nominal terms, they hold in excess of 60% of the value of outstanding shares. Hence, their activities are bound to sway the market.
“We cannot begrudge our foreign investors, on the contrary, we applaud them for investing here but the bare facts show that transfers from their capital gains and dividends have a bearing on the market; this happened with MTN and some other stocks,” he explained.
He added that being investment-savvy, said foreign investors buy low and exit when the market is high and are willing to invest in other markets until the market is more favourable. On the contrary, local investors, he noted, tend to buy when there is a buzz around a particular stock; a point at which it might be oversubscribed to.
“We see many of our local investors coming late, instead of buying during the dip and selling high, they rather wait for traction on the market before buying. Many retail investors appear not to know that selling high and buying low and repeating the cycle can be employed as a strategy, when most of them buy, they hold for too long and when they sell, they stay away for too long,” he said.
The analyst forecasted that the market might see a slight decline in June, if similar events occur, following Ecobank’s announcement of dividend payments of 55p per share, amounting to a total of GH¢177 million.
Mr. Adagbe once again reiterated the need for sustained investment sensitisation and asked for more suasion to be applied to encourage institutional investors, who hold the lion share of stocks to trade, so as to promote market activity and liquidity.
On the debt side of things, the Ghana Fixed Income Market (GFIM) continued to record high volumes of trade with a closing figure of 16.45 billion for the month, representing a 3.14% appreciation month-on-month, with year-to-date volume of 92.35 billion being over 85% of the total trades for all of 2020.
This is dominated by government issuances as institutional and retail investors find safety, even as the economic effects of the pandemic linger.