GSE continues poor run into 2020

For two years the local stock market recorded significant losses which were attributed to major reforms in the financial sector – but January 2020 is no different.

After recording mixed results during the month, the exchange ended the last week of January with a loss of 1.62 percent – the benchmark Ghana Stock Exchange Composite Index (GSE-CI) dropped to 2,212.21 points, which translated into a year-to-date loss of 1.99 percent.

In 2018, the Composite Index recorded a loss of 0.29 percent or 2,572.22 points while 2019 recorded a loss of 12.25 percent or 2,257.15 points. By the close of 2019, the total market capitalisation declined by 7.11 percent year-on-year to GH¢56.79billion.

Databank Research, in its report on the exchange’s 2019 performance, noted that the equity market’s bearish performance in 2019 was induced by negative investor sentiments resulting from heightened currency pressures, post-IMF uncertainties and a widespread foreign investor sell-off.

It added that the political risk, buoyed by the upcoming Presidential and Parliamentary elections in Dec-2020, further worsened market sentiments. Out of the 39 equities that traded, the report noted that only six recorded price gains and 22 declined while the price of 11 stocks remained unchanged.

The bourse generated GH¢621.97million in turnover for 2019 compared to GH¢658.26million the previous year. The volume of shares traded also shot up 19x – from 200.41 million shares in 2018 to 3.79 billion shares in 2019.

The huge jump was influenced by a 3.49 billion share block trade in ETI on 29th August 2019 – the largest single trade in the history of the GSE. The trade saw International Finance Corporation’s (IFC) 14.1 percent stake in ETI sold to Arise B.V, an equity investor in sub-Saharan Africa financial institutions.


Despite the negative sentiments around the market, Databank Research noted that with Ghana’s improving economic conditions, along with the firming-up of corporate earnings, it believes there is room for the GSE to post a moderate return for 2020.

“From our technical analysis perspective, the GSE Composite Index could close 2020 around 2,528.01 points – translating into an annual return of 12percent. Market fundamentals also indicate that the GSE is grossly undervalued with a price-earnings (P/E) ratio of ~5.7x on a 12-months trailing basis (excluding the mining sector), which is significantly lower than its long-term historical average P/E of 11x,” it said.

Even with the positive outlook, Databank Research noted that it is a bit more cautious with its expectations for two reasons:

“First, 2019 was a peculiar year considering Ghana’s financial sector had not witnessed a crisis of that magnitude. The crisis which led to the collapse of some financial institutions and resulted in the lock-up of funds is likely to adversely affect the participation of some market players.

“Secondly, there remain concerns about government’s ability to control fiscal risk; especially in an election year. However, these concerns about Ghana’s fiscal risk should be mitigated as government implements new tax measures to boost revenues. Sectors likely to drive the market are the banking, OMC, FMCG and telecommunication sectors.”

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