The Ghana Stock Exchange (GSE) has declared 2020 a record-setting year as volumes traded boom in both the bond and equity markets which comes as a surprise, indicating a boost in investors’ confidence despite the coronavirus pandemic with its associated economic challenges.
A recent report released by local bourse revealed that “the Ghana Fixed Income Market (GFIM), smashed the 100 billion ceiling for trade volumes during 2020, ending the year at 108.45 billion in trades which was almost double the volume traded in 2019”.
Also, in the face of a challenging year for markets across the globe, the equity markets marched broadly higher recording its second highest annual volume traded in its 30-year history, although the benchmark index indicated a year-to-date return of -13.9%, closing the year at 1,941.59 points.
Spurred by Investor’s appetite on the back of low price to earnings (P/E) ratio, the local bourse witnessed its equity recording total volume of 695.4 million shares in 2020 as against 329.6 million recorded in 2019.
Accordingly, value traded shot up by 110 percent from GH¢275.5 million in 2019 to GH¢575.3 million in 2020,clawing back some of its loses during the year to end it well.
Cheap valuations on the equity market translating into low P/E ratio means that investors are willing to pay less amount per Ghana cedi of earnings or can expect to invest less amount when trading in shares in order to earn a cedi.
The month of December saw the highest trade figures with 140.4 million shares valued at GH¢132 million changing hands from November’s 115.6 million shares valued at GH¢101.5 million, representing an upsurge of 21% in volume and 30% in value on a monthly basis.
MTN Ghana stocks led the higher way dominating trading activities, and recording 78% of volume traded.
On the bond market, the Ghana Stock Exchange closed 2020 recording an all-time highest monthly volume traded of 13.34 billion valued at GH¢ 13.7 billion in December, which was “3.08 billion more than the previous record high set in October” of the same year.
“The volumes traded in December represents a 33% increase over the volume traded in November, whilst the 108.41 billion traded for the full year 2020 represents an increase of 95.14% over the same period in 2019,” GSE added.
The Ghana Fixed Income Market is enjoying far and away its biggest boom, which is the direct result of the positive long term yield curve developed over the past couple of years by the incumbent government’s successful issuance of cedi denominated bonds with tenors of up to 20 years.
The New Year has started on a good note as the GSEcomposite and financial stock indices have notched strongly,recording 0.13% and 0.25% return respectively for investors since the beginning of the year.
The global recovery is sputtering with most major financial asset classes already priced for perfection and even though Investors had to endure several days of unbridled panic, they are convinced that riskier assets like bonds and stocks will continue to perform well in 2021.
However, analysts anticipate that in 2021 there is the risk of a stronger than expected rise in inflation fuelled by unprecedented levels of monetary and fiscal stimulus, and the spike in demand once vaccines are widely distributed.
