Listed companies on the Ghana Stock Exchange (GSE) can breathe a sigh of relief as the local bourse is expected to end this year on a positive note in spite of the turbulent economic conditions presently prevailing in the country.

According to an Ecobank Research report that was copied to the Graphic Business stocks to watch in 2014 include CAL Bank (CAL), Ghana Commercial Bank (GCB), HFC Bank (HFQ, Enterprise Group Limited (EGL), SIC Insurance (SIC), Ecobank Transnational Incorporated (ETI) and Ecobank Ghana Limited (EBG) as they are those likely to drive the performance of the GSE.

The report said the banking sector would continue to dominate market activity for the rest of the year and this prediction comes on the back of the huge profits that the banks recorded last year.

The report identified CAL, GCB, Standard Chartered Bank (SCB), HFC and UT Bank (UTB) as some of the banking stocks that would drive market activity during the year.

“In addition, we expect to see to further activity in the insurance sector following Q1 2014 earnings announcements”, the report added.

“We expect the ongoing profit booking which is exerting pressure on the market to stabilise, following the announcement of Q1 2014 earnings figures. Subsequently, we expect the market to be lifted by half year earnings figures, which will be announced in Q3 2014”, it said.

GSE performance in Q1

The report pointed to the fact that investors sustained their confidence in the Ghanaian stock market during the first quarter of 2014 as a result of expectations that the valuation of the market would be boosted by impressive fiscal year (FY) 2013 earnings figures.

The year-to-date (YTD) return on the benchmark index (GSE-CI) hit a high of 13.7 per cent in February 2014 before slowing to close the quarter at 11.2 per cent on the back of profit booking by retail investors.

The report said, “the first quarter (Q1) of 2014 performance was in line with our expectations outlined in our FY2013 review titled, The Ghanaian Stock Market in 2013 —  January 27,2014”.

In the opinion of the report, the catalysts that will ignite investor confidence in the market include FY2013 dividend announcements and impressive Q1 2014 earnings figures especially in the banking and insurance sectors.

However, it is of the view that there is a growing concern among foreign investors on the macroeconomic environment in Ghana, especially the rapid depreciation of the local currency has depreciated 17.3 percent year to date (YTD), and could adversely affect their participation in the Ghanaian equity market for the rest of the year.

Three key sectors driving market performance

According to the report, three sectors drove the performance of the Ghanaian equity market in Q1 2014 were the insurance, banking and pharmaceutical sectors.

The insurance sector went up by 28.6 per cent as a result of sustained investor confidence in Enterprise Group Limited (EGL), which went up by 27.1 per cent YTD due to impressive FY2013 earnings figures.

Investors also renewed their confidence in SIC Insurance Limited (SIC) which rose by 33.3 per cent YTD as the company returned to profitability in FY2013.

The report anticipated sustained interest in SIC as its profitability improves in 2014 as a result of a slowdown in an ongoing write-off of outstanding premiums.

It said investors also sustained their interest in the Ghanaian banking sector, which rose by 17.9 per cent YTD mainly due to increased confidence in the sector ahead of FY2013 earnings announcements.

The top gainers in the banking sector were Standard Chartered Bank (SCB), SOGEGH and Ecobank Ghana Limited (EBG), which rose by 33.7 per cent, 33.3 per cent and 27.5 per cent to close at GH¢19.97, GH¢1.00 and GH¢7.15, respectively.

“We have recently seen profit booking in the banking sector, which is likely to persist until Q1 figures are announced next month”, the report said.