The bullish run experienced by the equities market in 2017 is set to continue unabated in 2018, according to analysis by Databank Research, based on its projections of a more stable cedi and a further decline in inflation and interest rates.
“The sharp decline of yields in the fixed income market is expected to provide further impetus for the equities market growth,” the research arm of Databank said.
It expects a series of right issues and other capital raising activities by listed banks, given the increase in the minimum capital requirement by the Bank of Ghana. “We expect GCB, StanChart, Ecobank, CALBank, GGBL, FanMilk, GOIL and Total to be the main drivers of stock market activity in 2018.”
After two consecutive loss-making years, with 2016 recording -15.33percent, the stock market bounced back positively by recording an impressive performance for FY-2017.
The Ghana Stock Exchange’s Composite Index rose by 890.63 points to 2,580 points year-on-year to post a return of 52.73percent. The total market capitalisation jumped from GH¢52.69billion in 2016 to GH¢58.8billion in 2017, with aggregate volume of trading increasing from 237.08million to 321.34billion.
Aggregate turnover also spiked from GH¢241million to GH¢515.12million for the year under review. Still, there was a positive market breadth with 19 gainers, 11 laggards and 12 unchanged stocks.
“Demand for equities soared during 2017 as yields on 91days treasury securities reached an 11.67percent year low, making Ghanaian stocks a more attractive option for investors compared to fixed income instruments,” Databank Research noted.
The sterling performance, it said, was due to several factors, including improved economic fundamentals with a rapid decline in inflation, a relatively stable cedi –which engendered investor confidence in Ghana– and debt reprofiling.
“The government’s restructuring of the country’s debt stock freed up short term credit and this is expected to enhance private sector growth and boost further GDP.”
The energy sector debt was partially restructured through the issue of a GH¢4.7billion ESLA bond. The partial settlement of the energy sector debt, according to Databank, is expected to reduce the level of non-performing loans in the banking sector and consequently, the quality of bank assets.
“The financial sector stocks are expected to record earnings growth in 2018 as the Ghanaian economy continues to recover.The improved asset quality of banks, coupled with the projected expansion in the economy, is expected to lead to an expansion in loan portfolios. This should positively impact bottom-line and growth for banking stocks.”
Due to improved economic conditions, Databank Research anticipates strong sales growth for FMCGs and oil marketing companies. “Sales growth for FMCG will be driven by product innovations and increased consumer discretionary spending.”
Major market activities in 2017
The market saw the departure of DPI, a leading Africa focused private equity firm, from CAL Bank through the sale of its holdings to AriseBV from the Netherlands.
Leapfrog Strategic African Investments (LSAI) also paid US$130million to buyout Sanlam’s stake in Enterprise Group Ltd.
UT Bank was delisted from the bourse after the Bank of Ghana revoked the banking license. The GSE suspended the listing status of five companies: African Champion Industries (ACI), GoldenWeb (GWEB), Pioneer Kitchenware (PKL), Transaction Solutions Ltd (TRANSOL), and Clydestone Ltd (CLYD) following their inability to meet listing obligations.