Financial Sector Stocks Led the Stock Market in the 1st Quarter

Ghana’s investment market
Ghana’s investment market

According to the first-quarter data released by the Ghana Stock Exchange (GSE), the Ghana Stock Exchange Financial Stocks Index (GSE-FSI), which measures stocks of publicly-listed financial sector companies, has for the first time in five years outperformed the rest of the sectors on the Exchange.

Compared to the benchmark market-wide Composite Index (GSE-CI), which lost 1.67 per cent at end of the period, the Financial Stock Index (GSE-FSI) gave investors a modest 1.07 per cent gain, while maintaining its value at 2,174.96 points.

Meanwhile, the Financial Stock Index rally gathered steam in the month of March alone following the release of results for last fiscal year, as the financial index gained 2.64 per cent during the month.

That notwithstanding, both indices are at significantly lower levels than last year, 2021. Putting this in context, in 2021, the GSE-CI returned 13.9 per cent at end of the first quarter, while the GSE-FSI rallied at 3.5 per cent. The CI and FSI went on to end the full year at 43.6 per cent and 20.7 per cent respectively.

A look at the market table indicates that the year’s biggest gainers have been financial stocks. There are some notable financial sector stocks leading the charge. They include: SIC Insurance Company PLC, Ecobank Transnational Incorporated (ETI), Trust Bank Gambia Limited (TBL) and Guinness (GGBL). In the other end of the table, Produce Buying Company (PBC), Fan Milk and Benso Oil are the laggards, with Access Bank being the only financial stock in that category.

Meanwhile, the development is not surprising owing to a number of factors including the respectable performance of financial services providers coupled with the overall muted activity of non-financial stocks on the local bourse.

Despite the fairly suppressed level of activity on the market in the first quarter, the banking and insurance sectors have performed admirably. The former has proven strong following the sector clean-up, and was not as affected by the pandemic as other sectors, although it has seen a marginal rise in non-performing loans in the recent earning reports. However, the same cannot be said for other sectors.

The MTN and GAX Conundrums

The market continues to be swayed largely by MTN in terms of volumes of shares traded. However, the non-activity of others continue to weigh down the wider market. In 2021 for instance, the non-financial stocks other than MTN were responsible for a combined 5.85 percent of volumes of shares traded and 10.56 per cent of value traded on the local bourse.

Moreover, MTN remains an outlier for the rest of the market and this remains an issue in a market of this size. It is yet to be seen if the market will soon return to normalcy where other sectors will pick up.

The biggest culprits of inactivity in the market remain those listed on the Ghana Alternative Market (GAX). The GAX which was established as a parallel market in 2015 and focusing on small and medium-sized enterprises with strong growth potential, the stocks listed on the GAX have seen little interest or subsequent activity.

Operators of the Exchange have however given clear indication of a proposed re-launch of the alternate market, with adjustments to listing requirements in a bid to ramp-up additional listings and stimulate trade.

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