The Managing Director of the Ghana Stock Exchange, Ekow Afedzie has pointed out that markets normally reflect the general economic conditions in a country. Specifically, he stated that the Stock Exchange Market in Ghana has over the years responded to the general economic conditions in the country.
“That’s why markets reflect generally what happens in the economy. If you look at the trend of our indices over the period of time, it has always reflected what has happened in the economy. The market was down when we had the financial sector reforms. The market was down when we had power crises some years ago. So, the market follows what happens in the economy. That’s is why when governments or central banks speaks, it influences the market”.
Meanwhile, he stated that the response of the market to the economy can either be positive or negative depending on what is happening in the economy. For instance, he pointed out that interest rates impact the market. According to him, high interest rates do not motivate people to invest. He also cited foreign exchange stability as one of the macroeconomic factors that foreign investors look out for before deciding to invest in any country.
General macroeconomic environment
Also, he noted that the general macroeconomic environment must be conducive for companies to perform and grow. Mr. Afedzie explained that these companies which are into manufacturing, services among others, operate within the economy.
Furthermore, the GSE Boss hinted that plans are far advanced to establish an Over the Counter (OTC) market in Ghana. According to him, The OTC market is for those companies that do not want to list but have shareholders. This will give them the avenue to float shares. He indicated that most investors and fund mergers will like to invest in listed securities because they are regulated entities. Emphasizing that “one of our main objective is to protect the investor”.
“We are just waiting for the regulator to give us approval. We are just creating markets for different target groups”.
Meanwhile, Mr. Afedzie pointed out that most people are now shifting from risky assets to risk-free ones. He cited the equity market as one of such markets that is risk-free. He educated that the equity market is a market where shares are traded and shares normally indicate ownership in an entity.
GSE performance in 2020
According to Mr. Afedzie, 2020 was a very good year for the GSE because it had made some progress despite the pandemic. He pointed out that most companies made profits in 2020. According to him, the performance of the company will drive investors to invest in such companies. He cited MTN as one of the companies that made so much profit last year. “So, that also drove the interest on the market”.
“In the midst of the pandemic, investors are looking for where to invest. Those with a lot of money who used to go to China to bring in goods couldn’t go. The money had to work. So, they need to look for ways to make their monies work for them.
“Also at the same time, we had a lot of shares been traded at the equity market. Especially companies like MTN which brought a lot of liquidity into our market when they listed in 2018. Then also we had value-traded going up. So that’s what has happened during this period and is continuing in 2021 on a more positive note. But the equity market which is negative in 2018, 2019, 2020 is beginning to move into the positive zone”.
Furthermore, Mr. Afedzie indicated that the value of the equity market was about GHS 55billion in 2019. Moreover, it has increased to GHS108 billion in 2020.
“So, that’s what happened in the bond market, astronomical increase in the value- traded”.
This, according to him, is because people were moving aware from risky assets. Why then are people moving away from risky assets? The GSE Boss explained that this is “due mainly because of the financial sector reforms, the economy itself, and above all, our interest rate”.
Targets for 2021
Meanwhile, the GSE Boss revealed that his outfit is trying to get a few companies to list on the market this year.
“Our target is to get five in the main market and another 3-5 on the alternative market. That’s what we are working towards. My target is to hit 100 listing on the market as quickly as possible to make the market more attractive”.
He pointed out that they are working to make the market attractive through sensitization of the companies. However, most companies are not listing because they are not ready. He explained that most Ghanaian entrepreneurs don’t have the culture of sharing. However, he advised corporate bodies that are not interested in sharing to be looking at the bond market to issue corporate bonds.