Stock analysts predict buoyant performance on GSE

stock analysts predict performance on gse

Stock analysts are confident trading activities will bounce back in the second quarter following a pickup in trading activities on the local bourse. The 2017 first quarter performance indicate that the stock market gained about 10 percent growth compared to the negative 4.26 percent recorded in the same period last year.

While investors of GCB Bank gained 1 cedi 64 pesewas to record the highest gains in the first quarter of this year, investors of CAL Bank were the highest losers as their stocks dropped almost 35 percent in the first quarter of this year.

With about 46 percent increase in price, GCB Bank topped the gainers for the first quarter. It was closely followed by Benso Oil Palm Plantation and StanChart which recorded 39.42 and 26.85 percent respectively.

Also, the share prices of Ecobank Ghana, Total Petroleum and Unilever Ghana Limited increased by 14.06, 11.11 and 5.76 percent respectively. With the exception of Unilever Ghana Limited, all the gainers for this year’s first quarter ended 2016 with losses on their share prices.

Also, of the top five gainers, only Benso Oil Palm and Unilever Ghana Limited recorded some gains in the same period last year.

An Associate Equity Trader at UMB Stockbrokers, Kofi Busia Kyei, explains to Citi Business News the reasons accounting for the performances of the listed companies that gained in the first quarter of 2017.

Investors were taking positions quickly ahead of the expectations of the new regime. They were expecting interest rates and inflation to drop…GCB has been resilient over the years, it gained about 22.1 percent in profits…generally, the bank has been a very good company,” he said.

But investors of CAL Bank recorded the highest loss on their share prices. The banking stock declined as much as 34.67 percent. It was preceded by Tullow Oil and Produce Buying Company with -22.60 and -16.67 percent respectively. Also, Guinness Ghana Limited, SIC Insurance and Enterprise Group recorded losses of 7.98, 1.52 and 0.42 percent respectively.

Kofi Busia Kyei further explains reasons accounting for their poor performances:

Basically CAL Bank’s profits were down over the period, down by over one hundred percent comparing 2016 and 2015…their cash also went down by 80 percent; investors also look out for these indicators before making decisions.

Meanwhile, the share prices of the remaining stocks such as HFC Bank, Ecobank Transnational Incorporated, Goil, ADB, UT Bank, Ayrton and Access Bank, remained unchanged.

The stock analysts are highly optimistic of the second quarter of 2017. They cite the new pro-business policies by the government and recent trends in interest rates as basis for their claim.

Also, the Managing Director of the Ghana Stock Exchange, Kofi Yamoah, tells Citi Business News he is hopeful the market will pick up despite a bullish performance in 2015 and 2016.



Performance of stocks on the Ghana Stock Exchange

performance of stocks

Investing in stocks is proven to be one of the most lucrative means of building wealth. Stocks may be either listed or unlisted. Unlisted stocks (also known as over-the-counter stocks) are stocks that are not traded on a stock exchange but directly between two parties in a non-standardised form. Listed stocks, on the other hand, are stocks traded on a regulated market or exchange such as the Ghana Stock Exchange. There are currently about 40 listed stocks on the Ghana Stock Exchange. These are made up of various industrial sectors such as banking, insurance, manufacturing, mining, and petroleum. Usually, the performance of stocks on the Ghana Stock Exchange is captured by the ‘GSE all-share index’. The GSE all-share index, which can further be represented in a percentage format  (GSE return), reflects the overall performance of all listed stocks on the exchange. Refer to this link for all historical GSE returns (from inception to date).

Besides the GSE all-share index, the performance of stocks can also be measured for each individual stock. The most common means of doing this is by computing the return on the stock based on its share price appreciation (or depreciation) over a period. For instance, if a stock starts trading at the beginning of the year at GH¢2 and closes at the end of the same year at GH¢3, the said stock would be making an annual return of 50%. That is [(3-2)/2] ×100.

In the table below, you will find the historical returns of the various stocks listed on the Ghana Stock Exchange. These figures, covering the past six years, are calculated based on their opening and closing prices for each of the years under study. The average returns for the latest five-year period (2012-2016) are also computed.

See also: Performance comparison of mutual funds in Ghana

Performance of stocks: Historical returns of stocks listed on GSE
2011 2012 2013 2014 2015 2016 Latest 5-year average
1 AngloGold Ashanti Depository shares AADS -16.7 4 0 1.9 -1.9 0 0.8
2 Access Bank Ghana ACCESS N/A N/A N/A N/A N/A N/A N/A
3 African Champion Industries Limited ACI 0 -12.5 -14.3 -66.7 0 -50 -28.7
4 Agricultural Development Bank ADB N/A N/A N/A N/A N/A N/A N/A
5 AngloGold Ashanti Limited AGA 0 8.8 0 0 0 0 1.76
6 Aluworks Limited ALW 8.3 -61.5 0 -60 600 0 95.7
7 Ayrton Drugs Manufacturing Co. Ltd. AYRTN 6.3 5.9 0 5.9 0 -25 -2.6
8 Benso Oil Palm Plantation Limited BOPP 46.7 27.3 129.3 27.7 -38.8 -17.1 25.7
9 CAL Bank Limited CAL -9.4 35.7 162.2 4.1 2 -25.7 34.9
10 Clydestone (Ghana) Limited CLYD -42.9 0 0 -25 0 0 -5
11 Camelot Ghana Limited CMLT -25 16.7 14.3 -25 0 0 1.2
12 Cocoa Processing Company Limited CPC 0 0 0 0 0 0 0
13 Ecobank Ghana Limited EGH (Formally EBG) 6.3 -6.3 87 35.5 -7.6 -8.6 20
14 Enterprise Group Limited EGL -24 26.3 291.7 -6.9 37.1 0 69.6
15 Ecobank Transnational Incorporated ETI -21.4 20 58.3 47.4 -3.6 -63 11.8
16 Fan Milk Limited FML -3.3 50.4 86.5 -20.7 40 51.7 41.6
17 GCB Bank Limited GCB -31.5 13.5 131 13.4 -34.9 -6.1 23.4
18 Guinness Ghana Breweries Limited GGBL -1.9 71.2 136.6 -48.4 -37.8 -18.1 20.7
19 NewGold Issuer Limited GLD N/A N/A -18.8 37 8.9 -0.5 N/A
20 Ghana Oil Company Limited GOIL 10.3 93.8 43.5 19.1 33.3 -21.4 33.7
21 Golden Star Resources Limited GSR -47.1 0 0 -14.9 -15 -2 -6.4
22 Golden Web Limited GWEB -20 0 0 -25 -66.7 0 -18.3
23 HFC Bank (Ghana) Limited HFC 2.3 0 113.3 68.4 -43.8 -15.6 24.5
24 Mega African Capital Limited MAC N/A N/A N/A N/A 33.3 0 N/A
25 Mechanical Lloyd Company Limited MLC 10 36.4 153.3 -26.3 -32.1 -21.1 22.0
26 Produce Buying Company Limited PBC 92.3 -28 -5.6 -29.4 -16.7 -40 -23.9
27 Pioneer Kitchenware Limited PKL -14.3 0 0 0 -16.7 0 -3.3
28 PZ Cussons Ghana Limited PZC N/A -25 338.9 -62 13.3 -35.3 46.0
29 Standard Chartered Bank (GH) Ltd. SCB 0.7 -74.7 29.9 36.2 -19.9 -25.2 -10.7
30 Standard Chartered Bank (GH) Ltd. (Prefrence shares) SCB PREF 0 0 0 5.8 29.1 5.6 8.1
31 Societe Generale Ghana Limited SOGEGH (Formally SG-SSB) -28.1 2.1 56.3 33.3 -20 -22.5 9.8
32 SIC Insurance Company Limited SIC -7 -15 14.7 -5.1 -62.2 -14.3 -16.4
33 Starwin Products Limited SPL -40 66.7 -20 -50 100 -25 14.3
34 Sam Woode Limited SWL 0 0 50 33.3 0 0 16.7
35 Trust Bank (Gambia) Limited TBL -69.9 0 -12.5 -31.4 54.2 -29.7 -3.9
36 Tullow Oil Plc TLW N/A 22.7 -8.1 0 -6 -18.3 -1.9
37 Total Petroleum Ghana Limited TOTAL 98.3 18.5 N/A 20.6 -16.4 -61.2 N/A
38 Transol Solutions Ghana Limited TRANSOL -28.6 -20 -25 0 0 0 -9
39 Unilever Ghana Limited UNIL 16.7 28.3 114.9 -41.6 -20.6 0.1 16.2
40 UT Bank Ghana Limited UTB 14.3 18.8 18.4 -44.4 -60 -70 -27.4

*N/A: Not available, mainly because the company was not listed on the stock market by then

Performance of stocks: Brief observations

According to the data above, the performance of stocks for most listed companies has not been encouraging over the six-year period. For instance, African Champion Industries Limited (ACI), Clydestone Ghana Limited (CLYD), Golden Star Resources Limited (GSR), Golden Web Limited (GWEB), and Transol Solutions Ghana Limited (TRANSOL) never recorded a single positive return throughout the period. Moreover, their latest 5-year average returns were -28.7%, -5%, -6.4%, -18.3% and –9% respectively.

Another key observation from the data has to do with stock volatility. Even though some stocks depict impressive average returns for the latest five-year period, the trend of their annual returns appears to be erratic. A typical example is Aluworks Limited. According to the data, Aluworks’ 5-year average return (95.7%) was contributed by the sole remarkable return (600%) it recorded in 2015. PZ Cussons similarly posted a 5-year average return of 46% which was mainly due to the 338.9% it recorded in 2013.

On the other hand, some listed companies have been consistent in good shape over the six-year period. A few of these stocks, according to the data, include Benso Oil Palm Plantation Limited (BOPP), Ghana Oil Company Limited (GOIL) and Fan Milk Limited (FML). BOPP recorded negative returns for two years (2015 & 2016) and positive returns for the rest of the four years. It further posted a 5-year average return of 25.7%. Similarly, Fan Milk Ltd recorded negative returns in 2011 and 2014, positive returns for the rest of the four years and a splendid 5-year average return of 41.6%. GOIL recorded only one negative return in 2016, with a 5-year average return of 33.7%.

In terms of industrial sectors, the banking and finance stocks seem to perform better than stocks of other sectors. A few studies show that the well-being of an organisation’s industrial sector may impact the performance of its stock. It is due to this reason why investors are advised to invest in industries they are familiar with. Thus, it may be beneficial to look further and compare the performance of stocks according to their industrial sectors. Refer to this link for the historical returns of stocks categorised by their various industrial sectors.

It is essential to note that stocks’ returns based on their price appreciation alone may not constitute their total performance. This is because other factors such as dividend payments and any bonus shares issued by the companies can also be considered. In spite of this, stocks’ returns play key role in terms of their performance rating. At least, we know that the rate of dividend payments by most companies is fairly low as compared to returns on stocks.

Furthermore, one must be cautious when utilising historical results for any financial decision. Although many financial analysts depend much on historical performance of stocks, a few veteran investors caution on such practices. For instance, Warren Buffet once argued that:

If past history was all there was to the game, the richest people would be librarians.”

In a nutshell, even though historical results may not guarantee the future performance of stocks, they may still aid investors to have a clear picture of what is happening on the stock market.