The Ghana Stock Exchange (GSE) is off to a strong start this year, ranking among the top 6 performers in Africa.
Adomoonline presents a breakdown of the positive momentum:
- Market Growth: The GSE Composite Index continued its upward trend in February, with both the main index and the Financial Stock Index recording gains exceeding 3% and 4.8% respectively.
- Year-to-Date Performance: As of March 11, 2024, the GSE has delivered a return of 7.17% in local currency (cedi) and 1.46% in US dollars.
- Economic Tailwinds: Ghana’s improving economic fundamentals, supported by the International Monetary Fund (IMF) program, are fueling the stock market’s growth.
- Increased Activity: Trading activity has surged significantly compared to last year, with a 62.41% rise in the number of transactions according to the February 2024 Market Activities Summary.
- Top Gainers: Unilever, Enterprise Ghana, and SCB were among the stocks with the highest price increases in February, exceeding 9%.
The Ghana Fixed Income Market also saw positive movement, with trading volume up 44.24% compared to February 2023. Government securities dominated the market, with long-term instruments accounting for a quarter of activity, followed by short-term instruments and corporate securities. Overall trading volume for the year is up by nearly half compared to the same period in 2023.
A look into the best-performing stocks in Africa
| STOCK MARKET | Y-T-D (LOCAL CURRENCY TERM | Y-T-D (DOLLAR TERM) | POSITION |
| Zambia LUSE ASI | 14.67% | 21.00% | 1st |
| Kenya NSE ASI | 3.51% | 15.32% | 2nd |
| Morocco MASI | 7.15% | 5.24% | 3rd |
| Malawi MASI | 5.00% | 5.00% | 4th |
| Uganda USE ASI | 6.46% | 3.12% | 5th |
| Ghana GSE-CI | 7.17 | 1.46% | 6th |
The impact of good-performing GSE on Ghana’s economy
The strong performance in the first quarter of 2024 presents a positive outlook for Ghana’s economy. The exchange’s ranking among the top 6 performers in Africa, coupled with its year-to-date gains and increased trading activity, signifies several potential benefits for the nation.
Mobilizing Capital and Investment: A vibrant stock market acts as a vital engine for economic growth. Companies seeking to expand can raise capital through Initial Public Offerings (IPOs) or issuing new shares. This injects fresh funds into the economy, facilitating business development, job creation, and innovation. Additionally, strong stock market performance attracts domestic and foreign investors. Domestic investors gain confidence to invest their savings in Ghanaian companies, while foreign investors are drawn to the potential for high returns. This inflow of capital further fuels economic activity.
Boosting Business Confidence and Transparency: A healthy stock market fosters a climate of confidence for businesses. Companies listed on the GSE are subject to stricter regulations and reporting requirements. This transparency enhances investor trust and provides valuable insights into a company’s financial health. As a result, businesses listed on the exchange are perceived as more credible and reliable, potentially attracting more partnerships and investments.
Signaling Economic Stability: The GSE’s positive performance can be seen as a reflection of Ghana’s improving economic fundamentals. The IMF’s support program signifies confidence in Ghana’s economic policies and future growth prospects. This, in turn, attracts foreign investors and encourages domestic businesses to expand. A rising stock market can also improve the country’s credit rating, making it cheaper for the government to borrow money for essential infrastructure projects.
Challenges and Considerations: While the GSE’s performance is promising, there are challenges to consider. A relatively shallow market with a limited number of listed companies could hinder its long-term growth. Additionally, the dominance of foreign investors can make the market susceptible to global economic fluctuations.
Upshot
To capitalize on the current momentum, Ghana can take steps to deepen and broaden its stock market. Encouraging more companies, particularly in key sectors, to list on the GSE will diversify the market and attract a wider range of investors. Additionally, initiatives to promote financial literacy can increase domestic participation in the market, fostering a more robust investment base.
