Nana Agyei Opoku-Agyemang, the Chief Executive Officer (CEO) of Blackstar Brokerage, has disclosed that the reason for low patronage of some stocks on the Ghanaian stock market by some companies is herding behavior of investors.
The Ghanaian stock market has witnessed low trading activity through out the penultimate week of October, and according to the CEO, Ghanaian investors follow the crowd instead of doing their own analysis and research and make their own decisions, and take risks.
“Our markets mostly operate on herding behaviors. We see large trading activities in only a few stocks because investors believe previous trading activities and prices increases would also interest other investors to trade on those stocks.”Nana Agyei Opoku-Agyemang
Mr Opoku-Agyemang, in an exclusive interview with the Vaultz news, added that, Ghanaian investors have little understanding of the structures of the stocks listed on the Ghana Stock Exchange, and as a result, lead to low market activity on the local bourse.
“Our understanding of macroeconomic influences, market structure and fundamentals of listed firms are minimal, and this drives low market activity. Few analysts covering stocks on the market also contribute to low patronage”.Nana Agyei Opoku-Agyemang
Mr Opoku-Agyemang indicated that some equities on the Ghanaian Stock market have a small number of shares available for trading, so, investors have limited access to these stocks to trade which leads to low trading activity. Also, he noted that some investors hold some stocks for long term, with the goal of realizing price appreciation, despite volatility.
“Low float on the path of listed firms also account for low trading activity. We also have few institutional investors on the market who generally have a buy and hold strategy.”Nana Agyei Opoku-Agyemang
How Equities can Improve Trading Activity
In the intervening time, the Blackstar’s CEO advised companies listed on the Ghana Stock Exchange and looking to boost their trading activities to engage experts and analysts to explain their business development strategies to them to enable them have a clear directional views of the company to help them in their decision making processes.
“Companies need to interact more with analysts to ensure that analysts have a clear view on what the company is about and its strategy going forward. Once several analysts cover the stocks, it gives the stock more exposure.”Nana Agyei Opoku-Agyemang
Mr Opoku-Agyemang also charged companies to increase the number of stocks they make available for trading and by this, he stated, will help boost trading activities on the Ghana Stock Exchange.
“Also, listed companies need to increase their float. That is, the number of shares that is out there to be traded should be increased. This would improve trading activities as investors.”Nana Agyei Opoku-Agyemang
By this, Mr Opoku-Agyemang asserted that investors will not have to struggle to come by stocks they are interested in.
The CEO of Blackstar Brokerage concluded by tasking the various companies listed on the Ghana Stock Exchange to prepare timely reports on their companies for investors to have overhead information on the company to help them make well timed judgements.
“Improvement of disclosure practices and timely, quality reports would also help listed firms boost trading activities on the market.”Nana Agyei Opoku-Agyemang