Financial stocks slows stock market activities

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Following a four-week bullish performance of Ghana’s stock market, which started on May 08, 2019, activities have again begun to slow down again at a fairly fast rate, as at the end of last week’s trading session on Friday, June 14, 2019.

The return to the bearish trading that has characterized the market since mid 2017 emanates from a sharp decline in the performance of the financial stocks index during the five trading sessions last week.

The price rally which has been short lived, began to decline on Friday, June 07, 2019, at which time the market had recorded a year-to-date change of -0.75 and – 4.21 percentage points for the financial stock index (GSE-FI) and the Composite Index (GSE-CI), respectively.

Since the start of the slowdown in performance, both the GSE-FI and GSE-CI have contracted by 2.80 and 2.41 percentage points, respectively, reaching a year-to-date performance of -3.55 and -6.62 percent for the GSE-FI and GSE-CI, respectively as at the end of trading session on Friday, June 14, 2019.

The market began a partial rebound following a nose-dive in activities on the bourse which had reached lowest point for both  composite index (GSE-CI) and financial stock index (GSE-FI) at -10.89 percent and -10.19, year to date on May 08, 2019. This means the short lived price rally has not been entirely wiped out by the return of a bear market last week.

The GSE Composite Index (GSE-CI) measures the weighted average price changes of all the equities listed on the market; and the GSE Financial Stock Index (GSE-FSI) – tracks the weighted average price changes of financial services equities.

In an interview with Goldstreet Business, a stock market analyst with UMB Stock-Brokers, Kofi Busia Kyei explained that, the current performance has been due to the financial sector, whose listed banks which have not fully recovered from the cleanup, which began in 2017. Equity investors are particularly piqued by how UT Bank’s liquidation was handled – the bank had failed to comply with almost every financial reporting regulation for listed company without sanction until it was liquidated, taking equity investors monies with it.

However, he insisted that by the end of the year, the market will fully rebound strongly.

The market began the year with a capitalization of GHc 61, 510.90 million. However, by the end of trading session on Friday, June 7, 2019, the capitalization had dropped by GHc 2,706.49 million, reaching GHc 58,804.41 million.

By the end of the trading session of Thursday June 13, 2019, a few stocks such as Access Bank, Cal Bank, Clydestone (Ghana), GCB Bank, Ecobank Transnational Inc., PZ Cussons Ghana Ltd., and Trust Bank Ltd. (The Gambia), on the market were still showing some level of resilience, as they consistently have recorded  price earnings ratios (P/E ratio) of below five which translates into dividend yields of over 20 percent, which is competitive against current yields on fixed income securities such as government and corporate medium term bonds.

source: Goldstreet Business