Despite the continuous decline in interest rates on fixed income securities, investors looking to cash in on stocks have and continue to neglect the four listed equities on the Ghana Alternative Exchange (GAX), preferring stick to the main bourse.
A 2017 half-year review of the economy and the capital market by FirstBanC Research, a subsidiary of FirstBanC Financial Services, indicates that with declining rates on fixed income securities, investors did turn to stocks in droves but not the SMEs-focused alternative market.
The report also indicates that since the listing of these four equities – Intravenous Infusions Limited (IIL), Samba Foods (SAMBA), Hords Limited (HORDS), and Meridian Marshall Holdings (MMH) – there have been improvements in their financial results and general operations, which are yet to make investors amenable to them.
A scan through the 2017 half year and 2016 full year financial reports of these listed equities point to a turnaround in their fortunes, with some recording profits whilst others have seen their losses reduce significantly.
“Despite the increased demand for equities in the first half of 2017 (1H17), demand for companies listed on the GAX was poor compared to the first half of 2016 (1H16). This is because even though some of the companies listed on the GAX reported strong financial results, investor interest on the GAX is generally low,” it noted.
A total of 348,322 shares were traded in 1H17 compared to 10.3million shares traded in 1H16, marking a 96.62percent decline. IIL was the most liquid stock on the GAX trading a total of 297,332 shares, representing 85.36percent of shares traded. SAMBA and HORDS picked 12.37 and 2.27percent respectively with MMH seeing no trading activity during the period.
In terms of the value of traded shares in 1H17, a total of GH¢54,294 was recorded with SAMBA having the largest value of 51.6percent closely followed by IIL taking in 46.95percent and HORDS trading 1.46percent with no MMH share traded.
Due to the significant reduction in volumes and values of traded shares, the market capitalisation of the GAX saw a marginal decrease from GH¢46.82million in 1H16 to GH¢44.08million.
The positive view from the main bourse
Meanwhile, the same cannot be said of listed equities on the main bourse. Improvements in the macroeconomy due to stable power supply, declining inflation, stable currency regime and falling interest rates on fixed income has been a bonanza for them, especially financial stocks.
As at the end of 1H17, the GSE Composite Index recorded a gain of 16.31percent as against a comparative loss of 10.4percent during 1H16. Led by the financial stocks whose index recorded 18.08percent in 1H17 as against a loss of 13.41percent, the report noted that more should be expected from the financial markets.
“Fund managers and other retail investors, who hitherto would have made fixed income placements at attractive interest rates, considered the GSE as an alternative market for investments. The bullish run on the local bourse has benefited stocks with stronger fundamentals as against a market-wide capital appreciation,” the report noted.
With the market cap expanding by 12.84percent to end 1H17 at GH¢59.46billion as against GH¢54.79billion in 1H17, the volume of traded shares at the end of 1H17 was 251million, representing a 292.45percent increment on the figure recorded in 1H16. Financial stocks accounted for 82.82percent of total volume in 1H17 as compared to 62.11percent in 1H16.
The value of traded shares in 1H17 rose 163.19percent to GH¢360million with the financial sector alone accounting for approximately 76.99percent of the total value, compared to a meagre 34.13percent recorded in 1H16.
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