The absence or underrepresentation of key sectors like mining, oil and gas, telcos and banking on the bourse does not make for a true measure of economic activity in the country, Kofi Yamoah, Managing Director of the Ghana Stock Exchange (GSE) has said.
“Exchanges, throughout the world, are more or less barometers of economic activity in the country they operate in. And so, if you have an exchange that doesn’t have telecom represented, and telecom is a big sector as far as the country is concerned, then that is a problem,” Mr Yamoah told the B&FT.
“Let me say that mining is also a big sector as far as the country is concerned, and also the banking and the insurance sectors. The oil and gas sector can also be seen as key as far as the economy of the country is concerned now. And if we have all that I have mentioned underrepresented on the exchange, then, the exchange doesn’t become a true barometer of what economic activity is in this country,” he said.
Whilst none of the six telecom companies is listed, only Anglogold Ashanti and Golden Star Resources are listed from the mining sector, and under 10 out of over 30 banks operating in the country are listed.
Mr Yamoah’s concern follows two consecutive years of poor performance by the bourse; in 2015, the GSE recorded a negative 11.77 percent growth in cedi terms, which means that the changing average value of the share prices of all companies on the stock exchange was in the negative.
The situation worsened in 2016, as the all-share index presented a negative 15.33percent growth, with market capitalisation dropping from GH¢57.116billion in 2015 to GH¢52.690billion in 2016.
The local bourse has been weakened by poor economic fundamentals, driven largely by an unstable currency, high inflation, and high interest rates, as well as the power crisis that hit manufacturing firms and other businesses hard within the period.
Aside or as a result of the difficult macroeconomic environment, Mr Yamoah said a lot of investors are moving from the equity market to the fixed income market.
“It explains the fact that the equity market has been seriously down in 2016; this is the second year of negative territory for the equity market and we believe something ought to be done about it or we may go into the new year with the same problems which will not be good for the market,” Mr Yamoah told the B&FT in December.
The GSE, he said, is putting measures in place to woo more companies, especially multinationals, expressing optimistic that the market will pick up if interest rates go down and the cedi stabilises as expected this year.
Source: B&FT
