The primary equity benchmark, the Ghana Stock Exchange’s Composite Index (GSE-CI), is expected to close the year at around the 2,817 points mark, reflecting a year-end return of 45%, according to figures contained in research published by indigenous investment bank, Databank, in its outlook for the final quarter of the year.
This would see GSE-CI, which was introduced in 2011 with a base index value of 1,000, as a market capitalization-weighted index comprising all listed ordinary shares end the year with a market cap in the region of GH¢ 63.8 billion. This would represent the CI’s highest value since mid-2018 when it recorded 3,483.21 points.
The report further suggest that the market appears to be peaking as the index continues to retreat from its highest level of 2,880.09 points recorded in the first week of October. “From a technical analysis perspective, the market seems to be peaking as the index continues to
pull back from its highest level of 2,880 points attained this year,” it reads in part.
Despite the aforementioned and the expectation that profit-taking activities will take a toll on growth prospects in some sectors, Databank appeared upbeat for modest growth potential, on account of “solid corporate profit growth” supported by the ongoing economic recovery to enhance market valuations.
“Our fundamental analysis suggests more room for the index to rerate upwards. The 12-month trailing market price-to-earnings ratio of 5x compared to a 5-year historical average of 10x indicates more room for growth.”
Sectors to look out for
The prevailing pandemic resulting in stocks from some key sectors trading at valuations lower than their historical trends and earning potential. These include the financial, Oil Marketing Company (OMC), and Fast-Moving Consumer Good (FMCG) sectors.
Despite being confronted by high credit risk environment, banking stocks are projected to perform well as “banks are well-positioned to cope with the weak operating environment and sustain profitability given their strengthened capital base.”
“The banking sector remains undervalued,” the report adds, as it is trading at a price to book value ratio (P/Bv) of 0.95 times below its 5-year historical average of 1.45 times. “The attractive valuations of the sector’s stocks should stoke demand and translate into a stock price increase.”
The insurance sector is touted as profitable on account of a growth in gross premium payments driven by increased digitalization with the lifting of travel and public gathering restrictions expected to reflect favourably in the demand for OMC and FMCG products.
“We expect FMCG stocks; Fan Milk and Guinness Ghana Breweries, and OMC stocks; GOIL Ghana, and Total Petroleum Company, to deliver improved financial results to drive existing demand on the equity bourse,” the report adds.
October market
At the end of the last trading day in the fourth week of October, a total of 1,726,618 shares, with corresponding to a market value of GH¢ 3,980,040.23, changed hands, with the GSE-CI inching up 1.33 (0.05%) points to close at 2,849.34. This represented a 1-week gain of 0.05%, a 4-week gain of 6.4%, and an overall year-to-date gain of 46.75%. The current market capitalization of the local bourse stood at GH¢ 64.1 billion.
Benso Oil Palm Plantation (BOPP) continued its rally with 10% share price appreciation to close the week at GH¢4.40. CalBank recorded the highest volume of 846,616 traded shares, followed by GCB Bank (496,001), Ghana Oil Company (324,241) and MTN Ghana (27,660).
