The Ghana Stock Exchange (GSE) was the third-worst performing equity market in sub-Saharan Africa for the first quarter of the year, according to research by investment-banking group Databank. The market’s benchmark GSE Composite Index fell by 1.1% in dollar terms, beating only the markets in Mauritius and Zambia among 15 surveyed in the region. Mauritius’ main index, SEMDEX, went down by 2.8%, and Zambia’s LuSE All Share index plunged by 8.6%. Despite the GSE -- the fifth-most capitalised in the region -- posting 8% gains in local currency terms, the steep depreciation of the cedi, by 8.3% to the dollar in the first quarter, caused the market to slip in dollar terms during the period. This slip could lead to losses for offshore investors if they decide to pull out of the market, Head of Research at Databank, Nii Ampa-Sowa, told the B&FT. “Poor returns in dollar terms could mean that foreign investors risk crystallising those losses if they choose to exit the market. However, if the prospects of the market are bullish (and the currency outlook is stable), then future foreign investors stand to gain if they enter the market now as valuations of listed companies are likely to be attractive (as was the case for Egypt in 2011/12),” he said. Nii said though the local market may have registered gains for home-based investors, assessing its performance in dollar terms helps analysts and offshore investors compare the performance with other exchanges. “It is an important indicator because it places the Ghanaian market on a global scale, and makes it directly comparable to similar dollarised indices and investments across sub-Saharan Africa and the world.” Egypt’s stock exchange (EGX 30) boosted its index by 38.4%, the highest in Africa for the first quarter. The markets in Uganda (ALSI), Namibia (Overall Index) and South Africa (FTSE/JSE All Share) also posted tidy gains, recording 18.4%, 11.9% and 11% respectively. Databank said it expects market sentiment and liquidity on the GSE to improve, backed by strong corporate earnings and the inflow of investments from private pension fund-managers. Nii Ampa-Sowa told the B&FT on March 30 that he expects the market’s local-currency return to exceed 15% by June. Meanwhile, for foreign investors, further depreciation of the cedi would not be welcome. “If the cedi continues to fall, foreign investors will remain jittery. Their participation in the equity market will probably reduce. Since the size of the longer-dated [government] bond offers is very small, it is possible that they could stay out of the fixed-income market entirely,” Nii said. The Bank of Ghana has announced it will sell GH¢200million of five-year bonds in June, but continued weakness in the cedi has raised expectations the yield will surpass the 14.25% paid at the last auction in December 2011.