The local stock market has closed the first quarter of 2022 with a marginal improvement over February’s performance, a sign that investor confidence in the economy is gradually bouncing back.
The Ghana Stock Exchange Composite Index (GSE-CI) ended March 2022 with a loss of 1.67 percent compared to the previous month’s loss of 3.33 percent.
According to the Ghana Stock Exchange (GSE), this comes on the back of an uptick in investor confidence due to strong earnings being reported by listed companies – leading to an increase in activity on the market, recording 2,256 transactions.
The earnings season resulted in a flurry of activities, as the volume of stocks that changed hands and their corresponding value were up 591 percent and 797 percent respectively in March compared to February.
Per the latest data released by the GSE, the local bourse traded volume and value were 214.97 million and GH¢237.14million, up 272.59 percent and 389.35 percent respectively compared to what was traded same period last year. The volume and value traded were the highest monthly traded since August 2019.
Consequently, the Accra bourse saw its market capitalisation appreciate by 12 percent on a year-on-year basis to end the first quarter at GH¢64billion.
The market was propelled largely by the performance of financial stocks as measured by the Financial Stock Index (GSE-FSI) – which closed the period on a positive note with a return of 1.07 percent.
This was occasioned by gains in SIC (46.67 percent), ETI (30.77 percent), GGBL (6.13 percent), TBL (5.26 percent) and ACCESS (4.50 percent).
Effect of capital gains tax
Market analysts point to re-imposition of the capital gains tax on securities listed on the equities market as having a dampening effect on investor sentiment, a key cause of the lukewarm start to the market this year. However, managers of the local bourse have indicated an ongoing engagement with the Ministry of Finance, which was described as ‘positive’, to reinstate the exemption when the next full-year budget is presented.
The tax exemption regime formed part of government’s continuous efforts to develop and deepen Ghana’s capital market. Its impact was evident when reinstatement of tax exemptions on capital gains for listed companies in 2016 encouraged investors, particularly local and retail, to actively participate in the market.
Other factors fuelling the bland performance of the GSE-CI during the first quarter of 2022 compared to the previous year include selling pressures amid relatively higher yields on fixed income securities; uncertainty induced by inflation and exchange rate pressures; as well as portfolio reversals by offshore investors.
The consensus among market observers remains that the market will see an upsurge, particularly in the third quarter, albeit not at the same pace as 2021.