23
Tue, May

Let’s make the GSE more relevant

Mr Kofi Yamoah, MD, Ghana Stock Exchange

The Ghana Stock Exchange kicked off 2017 on a positive note, with the benchmark GSE Composite Index (GSE CI) recording a steady rise to end the first quarter of the year at 1865.01.

This is after achieving a 12-month high of 1902.15 points in March this year. The impressive performance of the GSE CI was spurred on by the growing positive investor sentiments.

Investor’s confidence in the country has been on an upward trajectory in the wake of the peaceful December 2016 presidential and parliamentary elections and the observed pro-business stance of the new government.

This, coupled with the falling fixed income yields, made the equities market an attractive alternative for investments.

We expect the falling yields in the fixed income market to continue providing impetus for the equities market. The benchmark 91-day bill currently has an interest rate of 16.4 per cent per annum compared with a return of ??-21 per cent?? per annum.

Market activity is forecast to remain buoyant (fuelled by the transactions of bargain hunters as most counters are currently trading at attractive prices), which offer a good point of entry onto the country’s bourse.

At the end of the first quarter, 23 companies were trading below their 2013 year-end prices. The dividend season, as well as investor expectations of improved first quarter 2017 earnings, is tipped to further drive activity on the GSE.

We forecast that Fast Moving Consumer Goods Sector (FMCG) to record increased consumer demand fuelled by the accelerated expansion of the macro economy in 2017.

Sector favourites Guinness Ghana Breweries and Fan Milk are all tipped to record increased returns to shareholders on the back of increased revenues.

Considering the rising prospects of the GSE and the bullish nature of the bourse, the Graphic Business urges the investing public to take advantage of the lower share prices on the GSE to buy stocks of listed companies for future gains.

For the paper, the listing of companies on the stock market offers a comparative advantage to businesses that may be denied loan facilities from the banks.

The paper also calls on companies (local and multinationals) to consider raising capital from the GSE. The main benefit derived from listing on the stock exchange is to raise capital and spread the risk of ownership among a large group of shareholders.

Spreading the risk of ownership is especially important when a company grows, with the original shareholders wanting to cash in some of their profits while still retaining a percentage of the company.

Listing on the GSE also offers brand equity because having a listing on a stock exchange also affords the company increased credibility with the public, having the company indirectly endorsed through having their stock traded on the exchange.

The paper also urges the management of the GSE to intensify public education and awareness of the listing processes on the GSE and the benefits companies stand to gain by listing on the GSE.

This is the only way the Ghana Stock Exchange can be made more vibrant and relevant in the marketplace.