Stock market updates: GSE begins 2018 on a good note

GSE 2018

The Ghana Stock Exchange (GSE) has started the 2018 year with impressive results. In just about two weeks into the New Year, figures from the stock market have started showing signs of promising returns for investors.

 

At the end of trading yesterday (16th January 2018), the GSE composite index inched up to 2,817.66 points. This reflects a year-to-date return of 9.22%. In the same period last year, the stock exchange recorded 2.57%.

 

So far, 14 out of the 39 listed companies have recorded some gains in the year. Prominent ones among them are GCB bank Limited (GCB), CAL bank Limited (CAL), Ecobank Ghana Limited (EGH), Enterprise Group Limited (EGL), Ecobank Transnational Incorporated (ETI), Ghana Oil Company Limited (GOIL) and Total Petroleum Ghana Limited (TOTAL).

 

Total Petroleum, for instance, has recorded a year-to-date return of 36.26% as of 16th January 2018.This is followed by GCB bank, which has so far recorded 34.46% in the same period.

Similarly, Ecobank Ghana Limited has posted a year-to-date return of 18.29%, followed by Societe Generale Ghana Limited, with 14.63%.

 

Other companies with positive results include Ghana Oil Company Limited (13.75%), Ecobank Transnational Incorporated (12.5%), CAL Bank Limited (11.11%) and Enterprise Group Limited (10.81%).

 

The rest are Standard Chartered Bank (GH) Ltd. (4.55%), Benso Oil Palm Plantation Limited (2.94%), Guinness Ghana Breweries Limited (1.94%), Agricultural Development Bank (1.37%), Fan Milk Limited (0.56%) and Unilever Ghana Limited (0.47%).

 

Meanwhile, Access Bank Ghana, HFC Bank (Ghana) Limited and Produce Buying Company Limited have recorded losses in the same period.

Access Bank and HFC Bank have lost 6.17% and 6.47% of their share prices respectively. Likewise, Produce Buying Company Limited has shed 16.67% of its value.

Stock market performance: GSE return for 2017 caps at 52%

GSE 2018

The Ghana Stock Exchange has ended the 2017 year on a positive note. This comes after posting losses for two consecutive years. At the end of the last trading session on 29th December 2017, the  GSE Composite Index increased by 3.33 points to close at 2,579.72. As a result, the GSE return for 2017 closed at 52.73%. Likewise, the GSE Financial Stocks Index went up by 4.66 points to close at 2,310.58, indicating a final return of 49.51% for the year.

 

Notable companies which ended the year with positive returns are Benso Oil Palm Plantation Limited (194.23%), Ghana Oil Company Limited (144.55%), Standard Chartered Bank Ltd. (106.8%),  HFC Bank Limited (85.33%) and Total Petroleum Ghana Limited (76.5%).

Others include Ecobank Transnational Incorporated (60.00%), Standard Chartered Bank Ltd. Preference shares (60.00%), Fan Milk Limited (58.04%), Enterprise Group Limited (54.13%), Agricultural Development Bank (52.48%), Unilever Ghana Limited (50.88%), CAL Bank Limited (42.11%) and Trust Bank (Gambia) Limited (34.62%).

The remaining companies with positive gains are GCB Bank Limited (40.28%), Societe Generale Ghana Limited (32.36%), Guinness Ghana Breweries Limited (26.38%), Sam Woode Limited (25.00%), Ecobank Ghana Limited (16.92%) and Aluworks Limited (14.29%).

 

On the contrary, listed companies that recorded negative results for the 2017 year are Mechanical Lloyd Company Limited (-60.00%), Tullow Oil Plc (-36.2%), SIC Insurance Company Limited (-16.67%) and Ayrton Drugs Manufacturing Co. Ltd. (-16.67%).

The rest are PZ Cussons Ghana Limited (-9.09%), Camelot Ghana Limited (-8.33%), AngloGold Ashanti Depository shares (-7.69%), Access Bank Ghana (-1.22%) and Mega African Capital Limited (-0.33%)

 

A number of companies however made no gains or losses for the 2017 year. These are African Champion Industries Limited, AngloGold Ashanti Limited, Clydestone (Ghana) Limited, Cocoa Processing Company Limited and NewGold Issuer Limited. Others are Golden Web Limited, Produce Buying Company Limited, Pioneer Kitchenware Limited, Transol Solutions Ghana Limited and Starwin Products Limited.

Investments on the GSE: Has the foreign investor benefited?

GSE 2018

Investors all over the world look out for avenues to put their funds in order to get some returns and the Ghana Stock Exchange is one of the possible options.  In the article “The performance of the GSE vs T-Bills”,published on citifmonline.com on 31st January, 2017, it was revealed that in the long term, the GSE returned marginally better than Treasury bills.

Looking at the GSE from the perspective of a foreign investor takes a different twist. I was in a discussion with an investor who informed me he had invested about USD5 Million on the Ghana Stock Exchange in the last eight years but has lost more than 50% of his investment even though the stock market is returning about 40% Year-To-Date this year (2017). I decided to take a closer look at the figures within that period.

GSE foreign investor _ interbank exchange rate

GSE foreign investor _ inflation year on year

The graphs above depict the performance of the various factors that have impacted the funds placed in the investment over the period. The Ghana Cedi has depreciated more than 70% within the period under consideration while the GSE has returned about 13% on average- More than 5% lower than that of 91 Day Treasury bill.

See also: Ghana Stock Exchange suffers losses after record high

GSE foreign investor _ GSE return

Putting the investor’s funds into perspective, as shown in the table above, the investor converted $5M to Ghana Cedis, which was GHC6M in 2008. He earned about 13% on the investment on the GSE to about GH¢16M. He then converted this amount to Dollars which as at the end of 2016 stood at about $3.8M. The result is that about 24% of his funds had depleted.

Even though the GSE may be returning positively to local investors, the foreign investor that converts Dollars to Cedis to invest in the local bourse may be making a mistake. The main issue here, after the analysis, is the stability of the cedi.

Managers of the Exchange and all stakeholders must work together to ensure measures are put in place to ensure that the GSE is competitive.

One major action that must be taken seriously is getting a policy in place that will compel multinationals to list. Owners of these multinationals who are mostly foreigners receive their dividends in foreign currencies especially the USD which are shipped out of Ghana’s economy. This puts pressure on the local currency thus contributes to depreciation.

Others include taking a second look at the cap on price changes on the Ghana Stock Market. Market Forces should be allowed fully to determine price changes.

In bigger markets, the stock exchanges communicate the health of their economies, but ours do not tell the full picture as companies are not fully represented.

The GSE needs rebranding, repackaging and fresh ideas to ensure acceptable returns to all investors.

 

Credit: Kofi Busia Kyei (Financial analyst)

Source: citibusinessnews



GSE begin second half of the year with impressive performance

registrars of ghana stock exchange

Just one month into the second half of the year, the year-to-date (YTD) return of the Ghana Stock Exchange has tremendously increased from its half-year figure of 16.31% to 31.99% as of 24th July 2017. To this effect, the percentage gained so far in the month of July alone is fairly equal to the overall percentage achieved by the bourse in the first half of the year. The graph below depicts the monthly trend of GSE YTD return for the year so far.

GSE return 2017
Monthly trend of GSE YTD return

Increased market activity played a major factor for the remarkable performance in July. In particular, the sustained interest of investors in stocks such as Standard Chartered Bank contributed to the successive gains on the exchange. In the month of July alone (between 1st and 24th July), Standard Chartered Bank has gained an additional return of 55.43 %. This exceeds the return of 39.98% it recorded in the first six months of the year. Besides Standard Chartered Bank, other stocks that have made good returns in the 3-week period (between 1st and 24th July) are HFC Bank, Fan Milk Limited, Ghana Oil Company Ltd. (Goil) and Benso Oil Plantation Ltd. (BOPP). Between 1st and 24th July 2017, HFC Bank, Fan Milk Limited, Goil, and BOPP have recorded positive returns of 32.73%, 25.21%, 15.79% and 14.06% respectively.

 

Despite the continuous impressive performance of the exchange, a number of stocks such as Agricultural Development Bank, Golden Web Limited, Cocoa Processing Company Ltd., Mechanical Lloyd Company Limited and Clydestone (Ghana) Ltd. have still not recorded any positive return in the year so far.

Article: Your savings account not an investment account

Savings _sikasem

Savings consists of the amount left over when the cost of a person’s consumer expenditure is subtracted from the amount of disposable income he earns in a given period of time, according to Keynesian economics, as quoted by Investopedia.

The amount left over is sometimes left in the bank account over a period of time, sometimes over a year.

A recent report published by the Bank of Ghana (BOG) shows Commercial banks in Ghana pay between 3.4% to 16.40% as interest on deposits (savings); an average of 11.20% by all the banks. Click here for full Bank of Ghana Report on the rates.

 

There are some bank customers who are unaware or careless about these rates and are even happy by just seeing their monies remain in their accounts. However, there are others who complain of receiving minimal interest on their savings while others complain of not receiving at all. The banks are then happier keeping customers’savings with them. In fact, if it tends to span over a long period, banks go the extra mile by offering customers exceptional services such as assigning personal relationship managers.

 

The BOG report is to guide customers in making decisions regarding their savings/deposits/leftovers and what is being earned on them.

Let’s delve into some reasons people open bank accounts:

  • For Accessibility: To be able to make regular withdrawals during business hours. This is why Banks offer 24/7 ATM service and others for this purpose.
  • For EmergencyPurposes: Money is put aside to cover emergencies. For instance, an unexpected car repair, friends and family requests, loss of job, are supposed to be catered for by emergency funds
  • Savings for Retirement: The earlier this begins, the less the requirement in future. In the period in life when one cannot engage in full time employment, it is necessary that a retirement fund works for you.
  • Saving to make a down payment for House, Car: People save to use as down payment for such facilities. This also provides an avenue for accessing loans. With banks,a better rate could be negotiated if the customer is able to provide a percentage of the cost of the product.
  • Savings to have fun: Another reason to save is to afford the luxury of a vacation.
  • Save for Sinking Funds: Sinking funds are set aside for improvements on car, house and other possessions. This fund can free the emergency fund.
  • To earn interest: The opportunity to earn an interest of “3.4%” is always better than keeping the money under your pillow.
  • Savings for education: Additionally, people save for future education. Masters and doctorates can be achieved by taking the first steps of savings.Children’s education is also a factor to save money.

 

From the reasons above, it can be noted that apart from savings for accessibility, funds for the other reasons are likely to be kept for up to a year or more. In this case, the left overs.

It is necessary to fish out good returns in order not to lose money, especially to inflation. Therefore, it is better to invest the money.

 

Again, according to Investopedia, an investment is an asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or will be sold at a higher price for a profit.

From the rates published by the BOG, the rates quoted are mostly lower than inflation rates, pointing to loss of purchasing power in real terms.

None of the rates also match up with rates offered by investment firms in the country, making it risky to save money over a long period in a bank account.

Treasury bills, for example, have over the period offered savers/investors cushion on inflation.

Savings _Tbill return

Real return over the years on the 91 day Treasury Bills, though not very impressive, has provided the necessary cushion to protect the purchasing power of investors.

From the graph above, since 2006 to 2016, it is realized that though real return is quiet slim, it’s still better than negative.

The Ghana Stock Market is also an avenue that gives appreciable returns.

Savings _stocks return

Unilever Ghana Ltd, Enterprise Group Ltd, Ecobank Ghana Ltd, Fan Milk Ltd, Benso Oil Plantation Ltd, GOIL and GCB Bank are a few selections of companies listed on the Ghana Stock Exchange that have returned appreciably to investors. An average of 13.65% inflation rate is far below the average return of the seven stocks of 258%, when funds were kept from 2007 to 2016.

Bank savings accounts are not investment accounts. Opening bank accounts should not be the prime motive; how much we earn on our monies should also be of concern to us.

 

Credit: Kofi Busia Kyei (Financial Analyst)

Source: citibusinessnews.com