The rally on the Ghana Stock Exchange (GSE) is anticipated to continue through the end of 2024, with Databank, a prominent brokerage firm, significantly upgrading its forecast for the market.
Databank’s latest report projects the Ghana Stock Exchange Composite Index (GSE-CI) to close the year at 4,380 points, reflecting a growth range of 35% to 45%. This forecast represents a substantial increase from the firm’s earlier projections at the start of the year.
“From a technical analysis standpoint, we expect the GSE-CI to close at 4,380 points, reflecting a growth of 40% (±500bps),” Databank stated in its quarterly update.
The GSE-CI exceeded earlier forecasts, closing the second quarter of 2024 at 3,829.61 points.
This performance is attributed to heightened investor interest across various sectors, including fast-moving consumer goods (FMCG), telecommunications, oil marketing, and financial services.
The robust market performance is supported by improved corporate profit visibility in a strengthening macroeconomic environment. Following the Domestic Debt Exchange Programme (DDEP), the fixed-income market remains subdued, prompting investors to turn more towards equities.
Databank Research highlights that the stabilising macroeconomic conditions, bolstered by a successful International Monetary Fund (IMF) program and debt restructuring, are expected to drive the GSE’s performance further.
The report noted that “the Ghanaian economy is benefiting from a well-executed IMF programme, which is fostering stability and nurturing positive earnings growth across various sectors.”
Banking Sector Recovery
The banking sector, which faced significant challenges due to the DDEP, shows signs of recovery. The first-quarter results of 2024 reveal a 53% year-on-year growth in net profits, driven by a 31% increase in interest income. However, the sector faces challenges with a rise in non-performing loans, which averaged 24.5% in the first quarter, up from 14.9% in the same period last year.
Many bank stocks are trading below their book values despite these issues, according to Databank, offering a “compelling buying opportunity for investors.”
Non-Banking Sector
The non-banking sector also contributes to the market’s strength. Benso Oil Palm Plantation (BOPP) has seen its stock reach an all-time high of GHC23 per share, benefiting from global production challenges and rising palm oil prices. “BOPP’s position is reinforced by favourable rainfall patterns and sound management practices,” Databank stated.
In the oil marketing sector, TotalEnergies is expected to experience significant earnings growth due to increased local demand and rising Brent crude oil prices following OPEC’s production cuts.
The FMCG sector, led by Unilever, FanMilk, and GGBL, is predicted to remain a key driver of market returns, bolstered by a gradual slowdown in inflation and increased government spending.
Telecommunications giant MTN is also on an upward trajectory, supported by network infrastructure upgrades and higher mobile money (MoMo) charges. Its revenue reached GH¢8.1 billion in the first half of the year.
While the overall market outlook is positive, Databank warns of potential risks. “We remain vigilant about possible profit-taking and increased volatility as we approach the election period,” the report cautions.
Additionally, concerns about sluggish growth in private sector lending due to high non-performing loan rates persist.
As of the first trading week in August 2024, the GSE’s market capitalisation stands at GH¢94.54 billion.
