Market watchers have tipped the Ghana Stock Exchange (GSE) to see increased activity this year – despite the new wave of pandemic posing significant risk like the first one that saw investors fleeing the market to invest in more profitable ventures like gold and currencies.
According to Databank Research the local stock market will witness a recovery in 2021, and forecast the GSE Composite Index to close the year around 2,398 points – translating into an annual gain of 24 percent, better than the 1,941.59 it recorded points in 2020 that resulted in a loss of 13.98 percent; and even still higher than the pre-pandemic points of 2,257.15 recorded in 2019.
The researchers have based their optimism on improved investor confidence along with a compelling market valuation; especially with the uncertainty of a national election no longer exists and a rebound in the last quarter that was largely due to improved investor sentiment.
“With a fundamentally sound banking sector, the announcement of successful vaccine trials in Nov-2020 and the Ghanaian presidential &parliamentary elections out of the way, the market is poised to make a recovery as investors unleash pent-up funds. Furthermore, the compelling market valuation should fuel the demand for stocks across the telecommunication, banking, insurance and OMC sectors,” Databank Quarterly Report said.
Last year, the plight of the already suffering stock market was further worsened by the negative impact of COVID-19 on business activities. As a result, fund managers stifled investments toward stocks and rebalanced their portfolios to benefit from high yields in the fixed-income market.
Same fears continue to exist that the pandemic’s new wave could significantly impact negatively on outlook of the local stock market. But providing further explanation on the issue, Head of Databank Research-Alex Boahen, in an interview with the B&FT, said companies, individuals and government now have access to more information that will help them cope with the pandemic; hence, its impact won’t be so significant.
“The new wave is a risk factor, but we think the worst of the pandemic is behind us. Businesses, government, and individuals in general have now learned to live with the disease. Now there is more information about the virus. Businesses have adopted technology to ensure they continue to offer their services and products. Coronavirus has actually fast-tracked digitization, and that will help companies cut down costs as well,” he said.
He further stated that introduction of the vaccine, which government has indicated is likely to arrive in the country by March, will also mitigate spread and fatality of the disease – adding also that the high valuation in advanced stock markets will push investors to the local bourse as it offers more attractive share prices for a better rate of return.
“Aside from the fact that businesses have adjusted to the new normal, there is also the vaccine. So, if you look at it from that perspective, there seems to be light at the end of the tunnel. By half-year it is expected that the vaccines will be here, so that gives some hope.
“Another thing is performance of the global stock market, which is doing very well; and so valuations in advanced markets are a bit stretched at the moment. Fund managers or investors will be looking at emerging markets or frontier markets to channel their investments because of the low valuation on these markets. Investors will be attracted to low stock prices because it may give them some gains,” he said.
Mr. Boahen however cautioned that any imposition of another lockdown this year will derail the outlook; thereby affecting, yet again, growth of the struggling stock exchange.
“If a lockdown happens, that will be a major setback to the economy at large and could impact businesses which depend on outdoor activities to drive their revenue. And if those companies are listed on the stock exchange, then it will certainly affect the market. For example, if you look at companies in the beverage industry and fast-moving consumer goods industry, they depend on outdoor activities to drive their sales; and so a lockdown would negatively impact their business,” he said.
