The Ghana Stock Exchange has witnessed an increase in market capitalization by 0.22 percent to settle at GH¢56.91 billion showing signs of a gradual pickup in stock market activities.
Market capitalization, in simple terms, is the real-time estimate of how much a company is worth as determined by the stock market, hence the total market value of all outstanding shares. Analysts also hold that market cap shows the size of a company and remains a basic determinant of various characteristics in which investors are interested, including risk.
Given its simplicity and effectiveness for risk assessment, Analysts reveal that the market cap can be a helpful metric for investors in determining which stocks they are interested in, and how to diversify various portfolio with companies of different sizes.
Market Watchers further hint that some factors, however, can alter a company’s market cap. This includes significant changes in the price of a stock or when a company issues or repurchases shares.
Although, market cap is used often to determine a company’s value, Analysts alert that it is an inadequate measure of the equity value of a company because the market price on which it is based does not necessarily reflect how much the entire business is worth. Shares are often over- or undervalued by the market, meaning the market price determines only how much the market is willing to pay for its shares.
The demand for bargain stocks that is shares trading at a lower price than a company’s intrinsic value or performance, according to Analyst also contributed to the gradual pick up in market performance. This is also because amid the coronavirus pandemic some stocks on the local bourse have been undervalued attracting investors to take advantage of such prices.
Stocks from the Information and Communications Technology, financial and oil sectors continue to perform well on the stock market. MTN Ghana for instance advanced to a new year high with 1.27 percent gain, pushing the benchmark index for all stocks on the entire market i.e., the GSE Composite Index up by 0.54% to close at 2,178.03 points with a 12.18% year-to-date return. Also, Cal Bank and Ghana Oil Company stocks made a strong showing making it to the list of top value leaders on the exchange.
Conversely, the GSE Financial Stock index which tracks only financial sector stocks mainly in the banking and insurance industry stayed flat, closing at 1,874.40 points, recording no change and returning 5.14% from the start of the year-to-date to investors on the local bourse.
A breakdown of trading activity suggests a total of 248,838 shares valued at GH¢196,639 changed hands compared to 6,505,761 shares valued at GH¢5,382,119 at the last session. MTN Ghana dominated trading activity accounting for 87.40% of total value traded.
Unfortunately, the performance of the stocks of Access Bank Ghana Plc, Unilever Ghana Plc and Aluworks declined recording negative year-to-date return of -2.05 percent, -9.89 percent and -9.09 percent respectively on the local bourse.
In general, despite the resurgence of the coronavirus pandemic with its accompanying challenges, the market continues to show signs of a rebound in economic activities.
