Macroeconomic concerns weigh on GSE in January

The benchmark composite index closes the period at 2,766.80

Despite an increase in activity, the Ghana Stock Exchange (GSE) saw the volume and value of shares traded decline by 64.98% and 45.09% respectively on a yearly basis (YoY) in January, according to the data. of the Accra Stock Exchange.

It comes as aggressive profit-taking entrenched in the market closing at a three-year high, coupled with concerns over macro conditions – inflation, currency volatility, fiscal deficit and uncertainty over the impending e-tax – continue. to bite.

This saw the benchmark composite index (GSE-CI) close the period at 2,766.80, representing a year-to-date (YtD) loss of 0.81%. As a result, the GSE-CI rose from its position of second among its continental peers to fifth place: behind the Nigerian Exchange All Share Index (NGX ASI), the Johannesburg Stock Exchange All Share Index (JSE ASI), the Regional Stock Exchange Securities of French-speaking West Africa. Composite Index (BRVM CI) and Nairobi Securities Exchange All Share Index (NSE ASI).

Once again, the financial sector index (GSE-FSI) underperformed the broad market; ending the reporting period with a YtD decline of 0.93%. It comes as technology and banking stocks accounted for 98.27% of the GH¢34.5 million in shares traded.

The participation of foreign investors increased slightly, accounting for 87% of transactions on the stock markets, compared to 86.98% for the same period in 2021.

Blues Q1

Commenting on the market’s year-to-date performance, a senior analyst at UMB Stockbrokers, Kofi Bussia Kyei, said the development is not inconsistent with expectations for the first quarter of the year.

He noted, however, that while the inflation trend – which closed January at 13.9%, a steady rise over eight months and its highest level in more than five years – as well as similar developments with the value of the local currency continues, we should expect an exodus to the fixed income market.

“We expected the first quarter to be a very slow market activity and we expect it to pick up as the year progresses. But looking at the inflation trend, the depreciation of the cedi, that will have an impact on the market; and if this is not corrected soon, it could lead to a shift towards more debt investment,” he explained.

He, however, expressed optimism that strong results in the banking sector, as well as MTN, will see sustained, if not dramatic, gains in the equity market.

His views are consistent with those expressed by Databank in its 2022 market outlook. The indigenous investment bank predicts “moderate gains” for the year, with the GSE-CI expected to close around 3,142 points.

“We expect bank stocks to spearhead the continued recovery in bank profitability, supported by expanding loan books, improving asset quality and increasing income from fees and commissions. Furthermore, the efficiencies resulting from the digitalization of banking services should help banks improve their cost-income ratios and increase shareholder value.

“We continue to see value in MTN Ghana, and the heavily weighted stock is likely to continue to lead the market this year. However, the stock will remain volatile in the short term as investors reduce their exposure to the stock until the market clarity is emerging on the electronic direct debit proposal on digital transactions,” he adds.

Fast-moving consumer goods (FMCG) stocks are expected to post modest gains as the economy expands, albeit at a slow pace due to still-tight operating variables. Petroleum Marketing Companies (OMC) should see more action on the back of a continued increase in construction. Marine and mining activities are expected to drive demand for petroleum products. “However, margin compression is likely in the near term due to rising inflation and currency-induced cost pressures,” Databank added.

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