Rebound in trading activity doubles growth on stock market

The Ghana Stock Exchange (GSE)

The Ghana Stock Exchange is expected to continue its recovery throughout the year, as a rebound in trading activities during the first quarter has led to double growth in turnover compared to the same period last year when the pandemic annihilated the market, Databank Research has said.

After going through very torrid times in 2020 after the country recorded its first case of COVID-19 in March, the stock market – which was already in a wobbly state even before the pandemic – suffered a 13.98 percent loss at end of the year; albeit better than the previous year’s performance.

But data compiled by Databank Research predicts a strong recovery for the local bourse at the end of this year – given it was the best performing stock exchange in sub-Saharan Africa for the first quarter, largely anchored on the rebound in economic activity due to the roll-out of vaccines.

According to the research firm, as measured by the GSE Composite Index, the Ghanaian stock market ended the first quarter of 2021 as the best-performing market in Africa; closing the quarter at 2,213.29 points, representing 13.99 percent growth year-to-date (YTD) after breaking the 2,000-points key resistance level in January. This performance represents a US dollar-adjusted return of 14.62 percent YTD and marks a two-year high for the bourse.

Again, volumes traded on the local bourse in the first quarter of the year was 101.9 percentage points higher than was traded in same period of 2020. Furthermore, turnover increased by 99.6 percentage points within the period under comparison. Turnover for the first quarter of 2021 was GH¢153.4million compared with GH¢76.8million for the same period previous year.

“The stock market recovery underway is expected to continue through second quarter of 2021, on account of rebounding economic activity along with the positive impact of ongoing vaccinations on investor sentiment. Ghana’s economy is recovering steadily from the COVID-19 shocks. Uncertainties surrounding the escalation of COVID-19 shocks to economic activity from a possible second wave of spread continue to wane due to the vaccine roll-out.

“The fading COVID-related risk and economic recovery should boost corporate earnings and stimulate demand for stocks. Additionally, market valuations remain very attractive across the bourse. The 12-month trailing market price-to-earnings ratio of 5x compared to a historical average of 12x serves as a good entry point for investors. Based on the compelling market valuation, we expect trading activity to remain strong as investors take positions in stocks,” the Databank report stated.

Market activity was also impressive as turnover for the quarter stood at GH¢153.4million, representing 100 percent year-on-year growth from 200.9 million shares traded. Telecommunications giant MTNGH remained the most traded counter, accounting for 93 percent and 88 percent of volumes and turnover respectively.

The company recorded 32.81 percent growth quarter-on-quarter, emerging as the best performing stock for the period and setting a 28-month high in the process – almost single-handedly driving the market’s growth. It achieved this feat on the back of a solid balance sheet in 2020, registering 38 percent year-on-year growth in profit after tax.

It was followed by Total Petroleum Ghana, which saw a 11.31 percent growth quarter-on-quarter on the stock market, as the oil marketing company reported a 163 percent year-on-year surge in profit after tax for 2020.

Financial stocks on the market also witnessed some gains. For example, Societe Generale Ghana recorded 17.19 percent growth – leading the gainers in the banking sector. It was followed by Standard Chartered Bank with 11.28 percent growth, while GCB Bank saw 11.11 percent growth quarter-on-quarter.

On the other hand, Unilever Ghana led the pack of laggards after recording a 26.9 percent loss in the quarter. This decline occurred after the consumer goods company reported losses for the second consecutive year.

The other laggards were in the banking sector. Ecobank’s decline was 12.5 percent and Access Bank’s was 2.05 percent, while CalBank declined by 7.25 percent quarter-on-quarter. Indigenous aluminum manufacturer Aluworks lost 9.09 percent of its market value during the quarter.

In all, the market breadth for the quarter improved with 9 gainers and 5 laggards, compared with 13 laggards and 9 gainers during the first quarter of last year.