The rise in volumes and value of shares traded on Ghana’s stock exchange is not expected to diminish anytime soon, but rather continue this year and possibly next year, analysis by FirstBanC Research, has shown.
The research subsidiary of FirstBanC Financial Services, an investment banking firm, explained that the market rally in 2017 was largely driven by financially stable and profitable companies.
“We expect this trend to continue in 2018 as the fundamentals of listed equities improve on the generally supportive business environment. We expect the banking sector to consolidate the gains made in 2017 by continuing the process of improving the quality of its loan book, thereby driving down Non Performing Loans (NPLs),” the report noted.
The Ghana Stock Exchange (GSE) was adjudged the best performer on the global equity market in January after recording over 20percent gains.
This was on the back of improving investor sentiment about the prospects of the domestic economy. Robust economic growth, relative stability of the local currency and improving fiscal space were factors that bolstered investor optimism.
FirstBanC noted that the market’s momentum will remain moderately strong in 2018, albeit at a relatively slower pace than in 2017 on the back of profit-taking.
“Nonetheless, we note that the bullish performance in 2017 has driven market valuations to record highs, even above July 2015 levels at the onset of the recent extended bearish market. Most of the companies are trading close to or above historically high P/E levels.
Even though we expect investor interest to be sustained, as yields on fixed income securities are expected to decline in 2018, companies with strong growth in earnings are likely to be the main beneficiaries of investor interest, and by extension strong share price performance, on the GSE,” the report noted.
The total market capitalisation advanced by 11.6percent from GH¢52.69billion at the end of 2016 to GH¢58.80billion at the end of 2017. The report explained that the GH¢6.11billion advancement in market capitalisation is as a result of notable gains in the prices of ETI, SCB, EGH, FML, GCB, GOIL and UNIL.
Gains in the price of ADB and ACCESS, companies that were listed in December 2016, also led to the increase in market capitalisation, with ADB emerging as the seventh highest capped stock on the market. This is despite a 36.20percent decline in TLW, the stock with the highest market capitalisation.
In terms of the aggregate value of trading on both the GSE and the GAX, including the HFC rights issue, came up to GH¢518.4millionin 2017, 113.69percent higher than the 2016 value of GH¢242.6million.
This was despite the halt in trading and subsequent delisting of UTB and the suspension of trading of African Champion Industry Limited (ACI), Clydestone (Ghana) Limited (CLYD), Golden Web Limited (GWEB), Pioneer Kitchenware Limited (PKL), Transaction Solutions Limited (TRANSOL) and Cocoa Processing Company Limited (CPC). In December 2017, HFC successfully raised GH¢50.56m through a renounceable rights issue.