Mr. Isaac Kwasi Mensah, a Financial Analyst and Portfolio Manager at SIC Financial Services Limited, has predicted tough weeks and months ahead of the Ghana Stock Exchange given there’s no end in sight for the economic woes as inflation and depreciation of the currency keep worsening by the day.

In an exclusive interview with the Vaultz News, Mr Kwasi Mensah gave insight into the outlook of the local bourse in the new year and also responded to the impact of the surge in inflation rate to 54.1% last week on the local bourse, as the cedi also continues to struggle against the American greenback. According to the analyst, even though the GSE performed abysmally in the just ended year, the year 2023 will also be tough for the local bourse.

“I believe that the Ghana stock market this year will be influenced by the very economic issues worrying us. Moving ahead, there is an anticipation of a tepid start to the year and with inflation rising more and more and the cedi weakening further, there lies tough months ahead for the Ghana Stock Exchange.

“You can judge from the performance of the Exchange since the beginning of the year that the GSE started the year on undesirable terms. The bourse is facing possible headwinds from inflation, interest rates and depreciation. This does not necessarily mean price corrections should be expected, but relative underperformance versus other markets in the sub region is a possibility.”
Mr. Isaac Kwasi Mensah

Despite this, the financial expert noted that the market has already digested several negatives and may sometimes experience an intermittent upward tilt albeit with volatility. “Investors will continue to search for and invest in a basket of stock specific opportunities which have the potential to deliver superior performance in the future”.

Investor Sentiments on the Low

Ghana, being atrophied by low fiscal revenue; widening fiscal deficit; and high debt levels, Mr Kwasi Mensah sees more inflation squeezes in the coming months as the global surge in food prices is taking a toll on emerging and developing economies. As a result, he noted that the investor sentiment, which is measured by market breadth, is fading in the Ghana stock market.

Mr Kwasi Mensah indicated that trends in the equity market this year will also continue to be guided by the movement of the cedi and the US dollar as well.

Even worse, Ghana continues to be buffeted by currency pressures on the cedi, which has started falling in recent days to around GH¢12.70 to the dollar at the parallel market despite recently recording some miraculous gains.

The analyst is putting all this together and beginning to fear that the looming effect ahead for Ghana is one that will hamper the consumption patterns of consumers, drive investors away, and discourage local investors from investing in the Accra bourse.

Policy Approach

Mr. Mensah, thus, canvassed the coming together of the policymakers in what he called “a critical moment,” adding that he is very encouraged by the strong interest from the government to go to IMF and the continuing IMF dialogue on policy responses. “I’m particularly concerned about the limited domestic policy space to addressing the current challenges, but then I have confidence in the IMF to deliver us the results”.

Mr Mensah, however, averred that a change from hawkish to neutral monetary policy, and stability in the economy are the factors that can swing the outlook for equities on an optimistic note.

For a recall, Ghana’s headline inflation increased again by 3.8 percentage points to a 22-year record high of 54.1 percent in the latest report by the Ghana Statistical Service (GSS) last week, spurring a myriad of analysts to point to the fact that inflation is likely to reach a record high in coming months.

The analyst, however, noted that while investors remain cautious about external headwinds, strong discretionary demand evident from high frequency indicators and stable government policies is likely to give the investor community confidence, which will change the tides around.

With inflation, in reality, chewing away at people’s pockets, and the latest debt exchange program tearing into people’s investments, and depreciation of the cedi giving Ghanaians hellish cost of living, policymakers must be on their feet to cause a change in the near future.