Data Bank Research analysis has revealed that trading activities of domestic investors on the Ghana Stock Exchange (GSE) went up by 2 percent in the first Quarter of 2021.
Trading by local investors on the Ghana Stock Exchange amounted to 13 percent. The figure represents a two percentage points rise over the approximately 11% recorded during the corresponding period of 2020. Historically, the local investments on the GSE ranged between 30 and 40 percent. On the hand, the activities of foreign investors on the local bourse saw a marginal dip from 89% last year to 87% this year, with total trades amounting to 303 million for the first quarter.
However, according to the data, domestic investors bought a total of 24.5 million shares and sold 14.1 million shares during the time-frame. This represented a 129.26% rise- from 16.8 million in quarter one of last year to this year’s 38.6 million during the period under consideration. This is consistent with the general improvement in activities recorded on the market from the final quarter of 2020.
Meanwhile, the Head of Research at Databank, Alex Boahen commenting on the analysis, stated that while it is not novel to see domestic investors being outpaced by their foreign counterparts, particularly in frontier and emerging markets, the trend appears to be on the ascendancy lately.
Comparing the historical range (30 – 40) to the current (11 – 13) percent of domestic investment on the Ghana Stock Exchange, the Analyst mentioned that the recent decline in domestic investor participation can, in part, be attributed to a better appreciation of the market by investors from more robust economies. This, he noted is because most of these investors are funds tasked with investing in frontier and emerging markets, and have access to better tools of assessment coupled with years of experience.
Moreover, commenting on the implications of foreign investors on the Ghana Stock Exchange, Mr. Boahen noted that an uptick in foreign investor participation over domestic investors has a bearing on the local currency’s performance against its primary counterparts. He also noted that foreign investors will not hesitate to exit the market with capital gains and dividends whenever the market conditions are not favorable. This, he believes put more pressure on the local currency.
However, he added that while this was previously a concern mostly limited to the debt market, improved equities trading is changing the narrative. “We observe foreign exchange pressures whenever foreign investors are exiting the market, and this is gaining ground in the equities market as well.”
The Head of the Research bemoans the slow participation in the market by pension funds which is currently around three percent as opposed to the 20 percent they are allowed to invest. Mr. Boahen charged the market to advertise itself by its performance. He however added that there appears to be a growing sense that funds, particularly pension funds, will begin to explore the market further if performance is sustained.
He therefore, calls on the local investors and shareholders to be circumspect when analyzing the Ghana Stock Exchange due to dynamics of the market.
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