As the Ghana Stock Exchange (GSE) heads for the final lap of the month of August, Ms Gifty Annor-Sika, a financial market expert and the President of Women in Forex Ghana has predicted that the stock market could remain subdued in the final week of the month of August.

According to the analyst in an interview with the Vaultz News, even though the Ghana Stock Exchange began the month of August in high spirits, last week was not particularly a great week for the local bourse because of the very headwinds facing the economy. She thus, indicated that the performance of the local bourse this week could exhibit a subdued trait last week.

“The Ghana stock market has exhibited a subdued tone over last week, characterized by a decreasing threshold with a negative slope and a minor consolidation. This muted trend is expected to continue in the final week of August due to both global and domestic factors.”
Ms Gifty Annor-Sika

The analyst explained that the aged currency market’s volatility driven by economic slowdown is a prominent concern to foreign investors on the local bourse. Ms Annor-Sika averred that the persistence of hawkish monetary policy and a risk of more rate hikes are significantly influencing the market sentiment. She noted that interest rates on the short end of the market is making investment in the stock market looks unattractive.

“The impact of rate hikes on the GSE is compounded by elevated inflation and economic deceleration, leading to a reduction in capital expenditure. This eventually is expected to increase consumer prices, leading to an elongated high interest rate cycle. Consequently, there has been an escalation in bond yields, casting a shadow on equity market.

“Investors are displaying caution as bonds and Treasury bills yields gain traction, emerging as appealing high-return investments. Broadly speaking, elevated inflation and interest rates influence both corporate earnings growth and valuation. Invariably, high interest rate for a long time will have an impact on valuation and the stock market.”
Ms Gifty Annor-Sika

Corrections Expected to Be Brief

The analyst noted that though total return will be subdued, if there will be any correction, it is expected to be brief. However, Ms Annor-Sika warned that the subdued performance may persist in the long term due to sturdy growth in domestic corporate earnings and a comparatively milder impact from the global economic slowdown. She noted that corporates are cashing from the phenomenon of disruptive global economy and downswing in domestic operations.

On the outlook, the analyst noted that though the stock market’s stirring growth this year has been driven by the demand for non-financial stocks, she expects the trend to continue, although she highlighted that there may be some blips of profit-taking as investors attempt to secure their gains.

Meanwhile, the GSE recorded a subdued performance last week, with the GSE-Composite Index recordimg a paltry 0.25% while the GSE-Financial Stocks Index similarly rose by a marginally 1.06% over the week, bringing their respective year-to-date performances to 25.59% and -17.40%.

The uninspiring performance was highlighted when a total of only 770,483 shares with a corresponding turnover of GH¢3,479,581.70 were traded during the week, representing a 99.08% and 96.80% slump in volume and value traded from the previous week.

There were GH¢0.02, GH¢0.05, GH¢0.18 and GH¢0.42 declines recorded for Cal Bank, GOIL, Access Bank and Ecobank Ghana (EGH) respectively with their respective prices ending the week at GH¢0.62, GH¢1.60, GH¢2.82, and GH¢3.32.

With the companies coming out with mid-year financial statements, it is expected that investors will maintain a favourable posture toward reliable, high dividend-paying and defensive stocks like Benso Oil, MTN and TotalEnergies, which offer steady earnings and returns even during economic downturns.