GSE: Cedi returns on equities rise by 14.9% but dollar returns plummets by 10%

The Ghana Stock Exchange (GSE) encountered a tale of two realities in the first half of 2023, as investors witnessed a noteworthy 14.9% return in cedi terms. The surge in market sentiment, buoyed by the International Monetary Fund (IMF)-backed support program, played a pivotal role in this resurgence. This upward trajectory marked a stark contrast to the challenging economic conditions faced by Ghana in 2022, which necessitated a rigorous debt restructuring.

However, a closer examination reveals a more nuanced narrative. Despite the impressive returns in local currency, the GSE’s performance was marred when assessed in dollar terms, registering a concerning -10.0% return for investors. The glaring divergence between the two figures underscores the impact of currency fluctuations on investment outcomes.

Within the African context, the GSE secured a respectable 4th position out of 15 stock markets in terms of performance denominated in cedi. Nevertheless, when the lens shifts to the global stage, the GSE faltered, attaining the 11th spot when measured in dollars. This discrepancy underscores the influence that exchange rate dynamics can exert on investment portfolios.

A notable driver of the GSE’s positive performance was the robust performance of non-banking stocks, which spearheaded the gains in the equity market. Regrettably, precise details of the specific stocks that contributed to this rally are unavailable at present.

The market capitalization of the GSE surged to an impressive ¢69.59 billion as of June 30, 2023, reflecting the growing valuation of listed companies on the exchange. This growth in market capitalization serves as a tangible indicator of Ghana’s nascent economic recovery.

In contrast, the Financial Stock Index, which encompasses the performance of financial sector stocks, took a severe hit, witnessing a significant decline of 17.57% during the first six months of 2023. This decline can primarily be attributed to the reverberations of the Domestic Debt Exchange Programme, which adversely affected the balance sheets of financial institutions.

When viewed holistically, the Accra Bourse, as the GSE is colloquially known, secured the 4th spot amongst African stock markets, based on cedi-denominated performance. Nevertheless, its ranking dropped to 11th when considered from the perspective of the dominant dollar. This dual ranking epitomizes the sensitivity of Ghana’s stock market to currency fluctuations and underscores the need for investors to adopt a global perspective.

Among the diverse array of listed stocks, a total of six experienced gains while ten grappled with losses. Unfortunately, the report does not provide specific details regarding the stocks that thrived or languished during this period, except for highlighting the best-performing and worst-performing stocks.

The first half of 2023 witnessed an impressive performance by Benso Oil Palm Plantation, claiming the top position with an astounding 84.44% return. Following closely, TotalEnergies secured second place with a commendable 70.00% return, trailed by Unilever at 60.82% and MTN Ghana at 50%.

However, not all equities basked in the glow of success. Fanmilk experienced a substantial decline of -56%, emerging as the worst-performing stock. Societe Generale and Standard Chartered Bank also suffered significant setbacks, registering losses of -41.0% and -35.96% respectively.

As Ghana’s stock market attempts to navigate the complexities of economic recovery, the interplay between domestic factors, international support, and currency fluctuations will continue to shape the fortunes of investors. Amidst this dynamic landscape, market participants keenly anticipate forthcoming reports for a comprehensive analysis of the Ghanaian equity market’s trajectory.

Source: Norvanreports