GSE: Negative market index to continue pending IMF programme, capital inflows – Prof. Elikplimi
The Composite Index of the Ghana Stock Exchange (GSE) is anticipated to continue recording negative returns (year-to-date losses) – at least for the short term – until the IMF’s economic support programme for Ghana commences.
The IMF programme which is expected to restore investor confidence will result in more capital inflows and halt ongoing portfolio reversals on the market thereby resulting into some stability on the local bourse.
Making the above assertions in an interview with norvanreports on the sidelines of the Tesah Capital supported UGBS Seminar Series, Professor Elikplimi Agbloyor of the University of Ghana Business School (UGBS), explained that current year-to-date loss of the local bourse can also be attributed to investors’ decision to switch from investing in equities listed on the bourse to fixed income securities which now offer higher rates of returns.
“I think the performance of the stock market will still be in the negative region, and that maybe towards the end of the year or next year when we have the IMF programme coming in and more inflows coming into the economy then things will begin to stabilise.
“But for the short term I think the market will suffer a bit especially because fixed income securities like T-Bills now have higher rates and so people will not want to put their monies into equities for now. Rather, they will want to invest in T-Bills,” he quipped.
According to the BoG in its 107th Monetary Policy Report, year-to-date losses on the stock market are on the account of the imposition of capital gains tax on securities, the application of E-Levy on investment transactions which has created a disincentive for investors, relatively higher yields on fixed income securities, uncertainty induced by inflation and exchange rate pressures, as well as portfolio reversals.
Despite the present and anticipated year-to-date losses of the stock market, Prof Elikplimi noted that savvy investors stand to benefit from the poor performance of the local bourse.
According to him, during periods of poor market performance, some equities become cheap. These equities during periods of market rebound, tend to appreciate in share prices resulting in significant capital gains for investors.
“Given that the market hasn’t dome well this year, there maybe opportunities in the market, because when stock prices fall, some become cheap and for savvy investors, they can take advantage and invest in some of these stocks,” he noted.
UGBS Seminar Series
The Tesah Capital supported UGBS Seminar Series saw Professor Elikplimi Agbloyor, unveil his recent research into equities traded on the stock market.
The research, he noted, was aimed at understanding companies listed on the stock market in terms of their characteristics such as market capitalisation, profitability, liquidity, dividend yield, growth potential among others.
According to him, the research is imperative as it can help investors make the right investment decisions.
Additionally, it can help investors construct portfolios that give increased returns but reduces risks.
