Exchange rate blues push GSE market cap down 27% YtD

Alex Boahen, Head of Research-Databank

The local bourse has not been spared the impact of a weakening cedi, with its market capitalisation losing 27 percent of its value in US dollar terms from beginning of the year to end-August despite the market cap remaining relatively flat.

The market had maintained a market cap in the region of GH¢64billion due to a number of diametric events which balanced one another. In January, Canadian-based mining company Golden Star Resources (GSR) delisted from the market – following its sale to China’s Chifeng Jilong – and in the process took away GH¢493million from the GSE’s value.

The market also suffered from the lowered share price of critical stocks, with its anchor stock MTN losing around GH¢1.84billion as its price fell from GH¢1.06 on the first trading day of the year to GH¢0.91 on its 12.3 billion outstanding shares.

The dip was however countered when in July another Canadian gold exploration, development and operating company, Asante Gold, listed on the Accra bourse – adding GH¢2.8billion to the GSE’s market cap. The market began the year at GH¢64.5billion cedis, using the generous official interbank rate of US$1 = GH¢6.01 – translated to US$10.74billion.

At the end of August, the market had lost approximately 0.08 percent of its value in nominal terms, closing the period at GH¢64.45billion. However, due to appreciable loss of value for the local currency, the GSE’s market cap was equivalent to some US$7.38billion – again, using the official interbank rate of US$1 = 8.23.

Commenting, Head of Research-Databank, Alex Boahen, described the development as a double whammy for offshore investors: saying it could, in part, explain the shrinking of foreign investor participation in the market this year. “Foreign investors are concerned about the exchange rate movement they are losing on two fronts; the market itself is down and the exchange rate is not favourable,” he said.

At the end of the first week of trading in September the GSE’s benchmark Composite Index (GSE-CI) was 2,508.99 points, having lost 280.35 points (10.05 percent) year-to-date.

Glimmer of hope

There are however growing signs of a renaissance in the equities market, as at the time of reporting it had made a one-week gain of 0.94 percent and a four-week gain of 4.76 percent. Mr. Boahen however maintained his outfit’s revision of its earlier forecast of the market’s performance for end of the year.

In its first-quarter Ghana Markets Review and Outlook for 2Q22, Databank Research had projected that the stock market would grow by approximately 12 percent this year. It however had to review this optimistic stance by end of the second quarter, expecting that the market would be flat as a result of developments in the economy.

He added that the better-than-projected performance of financial industry stocks, especially those of banks, will lift the broader market. “We have seen the financial sector do well, especially from the higher interest rates; but this has not reflected on the share price because there are bigger economic issues which continue to cast a dark shadow over the market.  We are still looking toward the market closing flat, and that is a little bullish because of the remaining uncertainties,” Databank’s Head of Research explained.

The Financial Stocks Index (GSE-FSI) has made a one-week gain of 2.22 percent and a year-to-date loss of 3.34 percent.

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