The Ghana Stock Exchange (GSE) has displayed remarkable improvement in performance from the beginning of 2023 until the end of August, ranking as the third-best performing stock market in Africa.
This achievement places it just behind Nigeria and Egypt, marking a significant shift from its status as the worst-performing market in the region at the close of 2022. During that time, portfolio reversals, particularly from foreign investors, and rapid depreciation of the cedi had a detrimental impact.
The Composite Index (GSE-CI) experienced a substantial rally, reaching 3,084.79 points during this period, reflecting a significant appreciation of 26.22 percent.
The market capitalization exceeded GH¢73 billion.
This rally can be attributed to renewed interest in the equities market, driven by developments in the debt segment.
A clear indication of this renewed interest is the fact that pension funds accounted for 17 percent of equity market trades between January and August 2023, a stark contrast to the 4 percent recorded for the same period in 2022.
The GSE is on track to exceed market expectations, but analysts stress that more must be done to sustain growth amid cyclical challenges.
This comes as the stock market has experienced a roller-coaster ride in recent years, marked by sharp highs and steep declines. Analysts closely monitor the market’s performance as it navigates challenging economic conditions, foreign investor sentiment, and policy changes.
2021: Recovery and Gains
In 2021, Ghanaian equities rebounded, closely reflecting the country’s economic recovery after pandemic-induced losses in 2020. The GSE-CI recorded an impressive annual return of +43.66 percent in local currency terms, second only to Zambia’s Lusaka Stock Exchange in Africa. This surge was attributed to increased consumer demand, a stable exchange rate, and robust corporate earnings across various sectors. However, the financial sector, including banking and insurance counters, lagged behind, with the GSE Financial Stock Index (GSE-FSI) returning +20.70 percent for the year.
2022: A Challenging Year
In 2022, the equity market faced adversity, emerging as the worst-performing stock market in the sub-region. Macroeconomic uncertainties, including currency pressures, high inflation, interest rate hikes, and sovereign credit downgrades, fueled widespread selling. Foreign investors led the selling pressure, creating a predominantly buyers’ market. This trend resulted in lower share prices, offering buying opportunities. Despite the turbulence, market turnover increased significantly to GH¢1.64 billion, driven by assets like the New Gold ETF, which attracted investors seeking refuge from inflation.
1HY-23: Signs of Recovery
The market showed signs of recovery in the first half of 2023, with investors returning to equities due to concerns about the impact of the Domestic Debt Exchange Programme (DDEP) on the fixed-income market. The GSE-CI achieved impressive gains of 14.90 percent, outperforming the GSE-FSI, which fell by 17.57 percent. Key factors contributing to this recovery included easing price pressures, a stable currency, and optimism about economic recovery following the successful negotiation of a US$3 billion extended credit facility with the IMF.
Outlook for 2023: Non-Financial Stocks in Focus
Experts closely watch the domestic stock market in the second half of 2023. Non-financial stocks are expected to continue leading the way, driven by strong demand. However, some profit-taking may occur as investors seek to secure their gains. Analysts have adjusted their year-end forecast for the GSE-CI to 15 percent (±300 basis points).
The announcement of a second wave of DDEP has raised concerns about its impact on financial stocks. As a result, income investors are likely to favor reliable, high dividend-paying, and defensive stocks such as Benso Oil, MTN, and TotalEnergies, which offer steady earnings and returns even during economic downturns.