Domestic investors account for 13% of GSE activities for Q1


Trading by local investors amounted to 13% of trading activities on the Ghana Stock Exchange (GSE) for the first quarter of the year, an analysis by Databank has shown.

The figure represents a two percentage points rise over the approximately 11% recorded during the corresponding period of 2020. Consequently, the activities of foreign investors saw a marginal dip from 89% last year to 87% this year, with total trades amounting to 303 million for the quarter.

The data reveal that domestic investors bought a total of 24.5 million shares, and sold 14.1 million shares during the time-frame. This represented a 129.26% rise – from 16.8 million in quarter one of last year to this year’s 38.6 million during the period under consideration. This is consistent with the general improvement in activities recorded on the market from the final quarter of 2020.

Commenting on the development in an interview with the B&FT, Head of Research at Databank, Alex Boahen, stated that while it is not novel to see domestic investors being outpaced by their foreign counterparts, particularly in frontier and emerging markets, the trend appears to be on the ascendancy lately.

He stated that the recent decline in domestic investor participation from what has been the observed historical range of 30 to 40 percent can, in part, be attributed to a better appreciation of the market by investors from more robust economies. This, he noted, is because most of these investors are funds tasked with investing in frontier and emerging markets, and have access to better tools of assessment coupled with years of experience.

He added that the trend can also trace its roots to the erosion of confidence by local investors as a consequence of recent happenings in the financial sector, as investors still seek safety in Treasury instruments.

FX implications

Mr. Boahen noted that an uptick in foreign investor participation over domestic investors has a bearing on the local currency’s performance against its primary counterparts. This, he said, is because foreign investors will not hesitate to exit the market with capital gains and dividends whenever the market conditions are not favourable – adding that while this was previously a concern mostly limited to the debt market, improved equities trading is changing the narrative. “We observe foreign exchange pressures whenever foreign investors are exiting the market, and this is gaining ground in the equities market as well,” he said.

While calling for circumspection when analysing the GSE due to dynamics of the market, such as the relatively short time since operations began, he observed that the phenomenon also indicates the confidence reposed in the wider economy by savvy foreign investors.


Touching on the slow participation in the market by pension funds – which is currently around three percent as opposed to the 20 percent they are allowed to invest – the analyst charged the market to advertise itself by its performance. He however added that there appears to be a growing sense that funds, particularly pension funds, will begin to explore the market further if performance is sustained.

“Fortunately for us, we run a free-market economy, and as such we cannot strong-arm pension funds or other investors into trading in the equity side of the market. The most effective persuasion the equities market can offer is to perform well and even outdo the debt market – to account for the increased risk and show investors that it is the more economically prudent option,” he explained.

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