The stunning performance of the pensions fund in the first half of 2021 has suddenly taken a nose dive, as revealed in a latest data from the Ghana Stock Exchange (GSE).
A marginal two (2) percent points decline in participation was experienced with pension funds as of June 2021, as it recorded five (5) percent growth in August 2021.
This development was made known in August 2021 report issued by the GSE to pensions fund managers.
Locally, “pension funds executed 5 percent of trades between January and August 2021 compared to 0.46 percent for the same period in 2020”.
However, “foreign investors contributed 68 percent of equity market trades between January and August 2021 compared to 84.68 percent in 2020”.
In the meantime, the Stock Exchange’s last year pension funds holdings in equities were about 2.5 percent.
However, the marginal increase of pension funds on the market has been a result of the profitability of companies listed on the bourse, while prices on the market have literally stayed the same.
Currently, the prices of listed companies relative to their profits, as measured by their price-to-earnings ratio, are comparatively low.
The Deputy Managing Director of the Ghana Stock Exchange, Abena Amoah, showed her utter surprise at the sudden influx of companies’ participation in the market.
“More than half of our companies are trading at a P/E ratio of 5 and below, it is unbelievable. The pension funds are looking at the arena, it is so cheap, and it is like a giveaway.
“That is why we are seeing many more of them coming back into the equities market.”
Abena Amoah
The equities market
A quick look at the main market’s cumulative performance from January to August 2021, in relation to the same period in 2020, shows that the volume of shares traded reduced by 2.23 percent from 378.65 million last year to 370.19 million in 2021.
However, in terms of value, there was an abrupt increase of 44.97 percent from GH¢272.55 million to GH¢341.22 million recorded this year.
In the meantime, the year-on-year, market capitalization and the primary index, the GSE Composite Index (GSE-CI) are up 15.69 percent and 48.94 percent respectively, with market watchers anticipating further positive activities on the market.
Meanwhile, the local equities market appears set to provide its highest return in half a decade with the Exchange’s Composite Index (GSE-CI) returning a favourable 41.66 percent year-to-date (YtD).
This development comes after significant lows recorded in 2014 and 2015, with -11.77 and -15.33 percent respectively, caused by the crushing power crisis of the period.
Similarly, the impact of the financial sector clean-up saw 2018 close at -0.29 percent; 2019 saw -12.25 percent and 2020 was worse off at -13.98 percent.
The turnaround market participation has particularly been driven by stocks from MTN, CAL and the likes.
Furthermore, the Chief Investment Officer with Axis Pensions, Nana Boamah, mid this year, suggested that the National Pensions Regulatory Authority (NPRA) needed to set “an investment minimum benchmark for fund managers”, to enhance performance.
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