The Ghana Stock Exchange (GSE), says it is committed to upholding the highest of standards to ensure that only the best performing companies stay on the local bourse.
This follows the compulsory and in some cases voluntary delisting of about 8 companies from the Ghana Stock Exchange since 2017.
While companies like Mechanical Lloyd and PZ Cussons voluntarily delisted from the Ghana Stock Exchange, others like Pioneer Kitchenware, African Champion Industries, Golden Web, Transactions Solutions Ghana and UT Bank underwent compulsory delisting.
Commenting on the recent delistings in an interview with Citi Business News, Deputy Managing Director of the GSE, Abena Amoah, explained that the local bourse was focused primarily on protecting the interest of investors as well as prioritizing the development of an enabling environment for listed businesses to thrive and for delisted companies to return after they have put their houses in order.
“We are here to ensure that investors are protected and to ensure that companies that raise capital from the market meet their obligations. We will always work with the companies towards meeting their financial reporting obligations, but if they consistently default we will facilitate their delisting, and give them an opportunity to correct any anomalies and return to any of our markets, be it the main market, the Ghana Alternative Market (GAX) or the Ghana Fixed Income Market (GFIM).”
On the decline in the Ghana Stock Exchange Composite index (GSE-CI) which reflects the average performance of shares of listed companies, Madame Abena Amoah called on local and international investors to develop a long-term view when it comes to investing in companies on the Ghana Stock Exchange in order to reap the inherent benefits.
The GSE-CI at the end of the second quarter of 2020 witnessed a 12 per cent drop.
But according to the Deputy Managing Director, the drop in share price valuation of companies does not necessarily always reflect poor performance, hence the need for investors to have confidence.
“Today at the GSE, we are even stronger now than we were 10 years ago when we didn’t have the debt market. So as an investor, when you come into our market you have the opportunity to invest in debt or invest in equities. Many times we chase only the short-term gain without keeping an eye on the long-term benefit. In the short-term prices can drop, it doesn’t mean the company is a bad company, it just means that it’s an opportunity to buy shares at a cheaper rate than you would on a normal day. For sure the same way prices go down they would go up,” she intimated.
Companies urged to strengthen corporate governance systems
The increasing number of companies delisting from the Ghana Stock Exchange (GSE) has been attributed to the failure of the companies to deliver dividends as well as share price appreciation.
That’s according to the head of Research at Databank, Alex Boahen.
Speaking on the recent delistings from the local bourse, Alex Boahen, attributed the situation to a plethora of issues including the poor performance of the companies.
“The reason why investors invest in companies is because they want the companies to be profitable so that they can pay dividends to them. They want their share prices to actually appreciate on the market so that they can make capital gains when they sell their stock. But if you look at it, recently these companies have actually failed to deliver both dividends and also share price appreciation, and it stands to reason that when it gets to a point, it’s probably in the interest of the shareholder and investor community for these companies to actually go off the market so that they can leave the public spotlight and then they can re-strategize and when things actually improve they can always come back and apply and list on the market again,” he explained.
While encouraging the about 30 companies still on the local bourse to strengthen their corporate governance systems as well as improve their operations in order to avoid being delisted, Alex Boahen also advised other businesses to consider listing on the Ghana Alternative Market, GAX, to avoid the strict compliance standards of the main market.
Valuation of consumer stocks decline by as much as 56% on Ghana Stock Exchange
Food and consumable sector stocks performance on the Ghana Stock Exchange were significantly poor for the first half of 2020 compared with their performance in the same period in 2019.
All the three food and consumable sector stocks on the local bourse– Guinness Ghana Breweries, Unilever Ghana and Fan Milk –as of June 2020, had declined in their valuation by 31, 14.7 and 25 percent respectively.
Over the same period last year, that is January to June of 2019, Guinness Ghana Breweries witnessed no decline, while Unilever Ghana and Fan Milk declined in their valuation by 0.7 and 37.5 percent respectively.
The poor valuation of the food and consumable sector stocks has been attributed to poor financial and operational performance.