In lieu of the recent third quarter data on the performance of the Ghana Stock Exchange (GSE) released by the Exchange, an analyst, Nana Agyei Opoku-Agyemang, the Chief Executive Officer (CEO) of Blackstar Brokerage, has warned that the surging turbulence in the financial market could trigger spasm of volatility in the Ghanaian stock market in this last quarter of the year.

According to the analyst, the stock market for the past years always reflect the performance of the financial market. So, a turbulence driven by the coronavirus pandemic and that of financial sector clean up is expected to impact the performance of the GSE in the last quarter of the year.

“Over the past few years, we have seen financial stocks anchor the market. This was impacted by the financial sector clean-up which was further worsened by the impact of COVID-19. Financial stocks over a couple of quarters have posted impressive reports and we anticipate marginal growth and improvement of price. I, however, expect some volatility in this 4th quarter, as a result of turbulence in the financial market. I also expect the market to be volatile because I expect the market to digest 3rd quarter earnings released by listed firms.”
Opoku-Agyemang

Mr Opoku-Agyemang, in an interaction with the Vaultz news, hailed the performance of the Ghana Stock Market since the beginning of the year up to this point. He thus, recalled the first half-year performance and the recent third quarter performance, labeling it as impressive. In the intervening time, he attributed the performance to bullish performance of some major stocks listed on the local bourse.

“As of the third quarter of 2021, the GSE Composite Index (GSE-CI) has gained 211.62 points, closing at 2,855.29 points, while the GSE Financial Index (GSE-FI) has returned 9.82 percent. In the first half of the year, the GSE-CI did 36.16 percent, while the GSE-FI did 4.97 percent. We’ve seen the GSE-CI do extremely well in the first half-year and the third quarter, because of price gains and recoveries in MTNGH, GGBL, SOGEGH, and others. We believe that the movements in the first half of the year so far, surpasses what has been done in the second half of the year.”
Opoku-Agyemang

The Lingering Problem of Low Trading Volumes and Companies Interest

The Chief Executive Officer suggested that, in part, trading activities on the Ghana Stock Exchange may not be an influencing factor in new companies coming to join the exchange, as many companies who are badly affected by the COVID-19 pandemic, will be interested in raising capital, hence join the GSE.

“Firstly, there is a possibility that trading levels on the stock exchange may not be an influencing factor in companies listing on the exchange. Secondly, companies are keen on raising capital especially because of the pull the pandemic had on businesses.”
Opoku-Agyemang

Mr Opoku-Agyemang, however, admitted that the performance of the Ghana Stock Exchange Composite Index (GSE-CI) may attract new entrant companies, but wondered if the Ghana Stock Exchange is ready for such moves since the volume of trades continue to be on the peripheral. He subsequently called on the Exchange to help solve the issue of frequent low trading volumes.

“Although the demand is there, the key question being raised is that, is the market capable of handling issue sizes that companies want to come in at? We have seen decrease trading volumes in the past few months. We do believe that the GSE-CI performance this year has piqued the interest of some firms but if the issue of low trading volumes is not solved, we believe companies that intend to list may be hesitant.”
Opoku-Agyemang

In the hindsight, the analyst noted that technical reasons can explain how stocks can remain relatively subdued in spite of turbulent fixed income markets.