The current period of falling shares is a good opportunity for investors who want to add on to their shareholding on the capital market and especially, those who foresee a bright future despite the current crisis, says SEM Capital Advisors Limited report.
SEM Capital Advisors Limited is a Ghanaian Asset Management Firm that offers individual and institutional accounts, mutual funds, pensions, provident funds, private wealth management and corporate finance advisory.
SEM Ltd as a market watcher conducted a survey which proves that though the country’s stock market has been negatively impacted by the novel coronavirus, this is the advantage investors can take and harness.
According to the report, among the listed companies on the Ghana Stock Exchange (GSE), only two that is, Ecobank Ghana Ltd and Aluworks Limited, recorded gains in their share prices in the second quarter. Ecobank Ghana Ltd recorded 8.7 per cent and Aluworks Limited recorded 10 per cent.
Of the other sixteen listed companies, all of them saw a plummet of their share prices. Fan Milk Limited recorded the hugest loss with a decline of about 55 per cent of its share value whereas Tullow Oil recorded the least loss of 0.08 per cent within the same period. Meanwhile, stock prices of the other 14 other companies remained flat.
According to SEM Ltd, the uncertainty and tension in the market is as a result of the outbreak. It holds that the pandemic’s impact has a bearing on the overall performance of the composite index which has caused panic in investors. The pandemic also led to manufacturing firms having had to battle with not being able to operate at full capacity in order to comply with social distancing protocols.
However, SEM Capital Advisors concluded that, it will be worth it if investors are willing to see past the current malperformance of the stock exchange and the fact that the virus still remains a threat.
“On the capital market, the GSE Composite and GSE Financial Stock Indices continue to record negative returns. We do not anticipate any significant changes in the market’s performance in the short term as investors adopt a wait-and-see attitude amidst increasing uncertainties of the impact of the COVID-19 on the economy.”
It further highlighted some sectors that are likely to experience further declines but assures investors of the future.
“We expect stocks in the oil sector and the manufacturing sector to witness further declines due to decline in world crude oil prices and the uncertainties of the Saudi Arabia-Russia oil war. The depreciation of the cedi will negatively impact the cost of sales of manufacturing companies as they import raw materials. The possible decline in share prices presents buying opportunities for investors who would like to take advantage of the low share prices on the stock market. Investors can increase shareholdings in anticipation of future price appreciation.”
Other investor opportunities
Besides the plummet in share prices providing an escape window for investors in the capital market in these difficult times, the fixed income market also presents them another window of opportunity.
According to the SEM Capital Advisors report, the Ghana Fixed Income Market profits are projected to increase over the short term as a result of government’s thirst for borrowing. This, it holds presents buying opportunities for investors interested in both short and longer dated securities, especially at the upper end of the profit curve, as investors can procure longer term securities to capitalize on returns.
It also states that the significant drop in Eurobond prices in the frontier and emerging markets have caused yields to increase. This, it adds, may present an opportunity for investors to increase their returns on their Eurobonds investments.
