The Ghana Stock Exchange has returned about 5.67% in dollar term to investors only 35 days into the year 2021, contrary to recent years when the market went through turbulent times. 

This is coming on the back of about 7.0% gain in the market in December last year, and the trend appears to be continuing.

Liquidity on the GSE in the month of January was high.

In addition to improved liquidity, the bulls started returning to the equity market.

An impressive 98.7 million shares valued at GH¢69.72 changed hands during the month with MTN Ghana leading the charge with 97.5% and 90.1% of volume and value traded respectively. Eight listed companies saw their prices go up during the month, with three price drops.

Already, Databank Research is forecasting an annual return of 24% for the GSE this year.

Reasons behind expected significant growth of GSE in 2021

It attributed its projection to a rebound in economic activity, improved investor confidence alongside a compelling market valuation.

“Successful elections and rebound in economic activity sets the market on recovery path. We are optimistic the Ghanaian stock market would witness a recovery in 2021 and forecast the GSE Composite Index to close the year around 2,398 points, translating into an annual gain of 24% (± 500bps).”

Furthermore, it said “a rebound in economic activity, improved investor confidence along with a compelling market valuation underpins our optimism.”

Ghana’s economy has shown strong signs of recovery supported by government’s fiscal reliefs and the continuous easing of Covid-19 restrictions to stoke economic growth.

The third quarter-2020 Gross Domestic Product figures released by the Ghana Statistical Service showed a slower pace of declining growth of -1.1% as compared to the -3.2% decline recorded for the second quarter of 2020. I

In addition, the Composite Index of Economic Activity registered a significant annual growth of 10.5% (September 2020) from 3.9 percent recorded in July 2020, representing a strong sign of economic recovery.

Why stock market failed to perform in last few years

In 2019, Investor confidence towards the Ghanaian stock market deteriorated, weakening demand for stocks, as the 2019 banking sector crisis led to the collapse of some banks and the impact spilled over to companies in other sectors.

The plight of the stock market was further worsened by the negative impact of Covid-19 and uncertainties surrounding the presidential and parliamentary elections.

As a result, fund managers stifled investments towards stocks and rebalanced their portfolios to benefit from the high yields on the fixed-income market.

However, with a fundamentally sound banking sector, the announcement of successful vaccine trials in November 2020 and the Ghanaian presidential &parliamentary elections out of the way, the market is poised to make a recovery as investors unleash pent-up funds.

Furthermore, the compelling market valuation should fuel the demand for stocks across the telecommunication, banking, insurance and oil sectors.