Tenants at Green Views who wish to invest in companies listed on the Ghana Stock Exchange will be happy to hear this: experts are predicting the local bourse will see increased activity this year which will result in gains for investors.

Market watchers have tipped the Ghana Stock Exchange (GSE) to see increased activity this year despite the second wave of the pandemic posing significant risk like the first one which saw investors fleeing the market to invest in more profitable ventures like gold and currencies.

Optimism for stock market recovery in 2021

According to Databank Research, the local stock market and Ghanaian economy would witness a recovery in 2021 and forecast the GSE Composite Index to close the year around 2,398 points, translating into an annual gain of 24 percent, better than the 1,941.59 it recorded points in 2020 which resulted in a loss of 13.98 percent, and even still higher than the pre-pandemic points of 2,257.15 recorded in 2019.

The researchers have based their optimism on improved investor confidence along with a compelling market valuation, especially after the uncertainty of a national election no longer exists; and a rebound in the last quarter which was largely due to improved investor sentiment.

“With a fundamentally sound banking sector, the announcement of successful vaccine trials in Nov-2020 and the Ghanaian presidential & parliamentary elections out of the way, the market is poised to make a recovery as investors unleash pent-up funds. Furthermore, the compelling market valuation should fuel the demand for stocks across the telecommunication, banking, insurance and OMC sectors, Databank Quarterly Report said.”

Concerns about effects of second wave disperse

Last year, the plight of the already suffering stock market was further worsened by the negative impact of Covid-19 business activities, as a result, fund managers stifled investments towards stocks and rebalanced their portfolios to benefit from the high yields on the fixed-income market.

Same fears continue to exist that the second wave of the coronavirus pandemic could significantly impact negatively on the outlook of the local stock market.

But providing further explanation on the issue, Head of Databank Research, Alex Boahen, told local newspaper the B&FT that companies, individuals, and government now have access to more information that will help them cope with the pandemic, hence, its impact won’t be significant.

“The second wave is a risk factor but we think the worst of the pandemic is behind us. Businesses, government, and individuals in general, have now learned to live with the disease. Now there is more information about the virus. Businesses have adopted technology to ensure they continue to offer their services and products. Coronavirus has actually fast-tracked digitisation and that will help companies cut down cost as well,” he said.

Arrival of vaccines will attract investors

He further stated that the introduction of the vaccine, which the government has indicated is likely to arrive in the country by March, will also mitigate the spread and fatality of the disease; adding also that the high valuation of advanced stock markets will attract investors to the local bourse as it offers attractive share prices.

“Aside from the fact that businesses have adjusted to the new normal, there is also the vaccine. So if you look at it from that perspective, there seems to be light at the end of the tunnel. By half a year it is expected that the vaccines will be here so that gives some hope.

Another thing is the performance of the global stock market which is doing very well and so valuations in advanced markets are a bit stretched at the moment. So fund managers or investors will be looking at emerging markets or frontier markets to channel their investments because of the low valuation on these markets. Investors will be attracted to low stock prices because it may give them some gains,” he said.

Mr. Boahen, however, cautioned that any imposition of another lockdown this year will derail the outlook, thereby, affecting, yet again, the growth of the struggling stock exchange.