Should trend analysis be anything to go by, then the Ghana Stock Exchange should rebound next year 2020, the next election year after a woeful performance in 2019 currently returning about -16%.
Investopedia defines trend analysis as a technique used in technical analysis that attempts to predict the future stock price movements based on observed data trend. The investment education portal continues by suggesting that trend analysis is based on the idea that what happened in the past gives traders an idea of what will happen in the future.
Checks by the Young Investors Network Research show that the Ghana Stock Exchange (GSE) has followed a particular pattern in election years and 2020 may not be different.
Source: GSE
The biggest return was in 2004 when it returned 91.33% followed by 2008 and then 2012 returning 58.06% and 23.81% respectively. 1992 and 2016 were odd, the market returned -3.63% and -15.33% respectively.
Fundamental reasons could be attributed to these returns aside the fact that they were election years. The stock exchange thrives on good financial performance of the listed companies which emanates mainly from stable macro-economic factors.
The 2016 woeful performance was attributed to high inflation, high interest rate, unstable exchange rate, power crises, et cetera mainly emanating from preceding years.
| 2016 | Sept 2019 | |
| Inflation | 17.75 | 7.80 |
| Interest Rate | 25.50 | 16.00 |
Source: BoG, focus-economics.com
| 2014 | 2015 | 2016 | 2017 | 2018 | Sept 2019 | |
| Exchange Rate (vs USD) | 3.19 | 3.81 | 4.30 | 4.54 | 4.89 | 5.45 |
Source: BoG, focus-economics.com
These factors as well as others contributed to the high cost of doing business of the listed companies which reflected on share prices on the GSE.
The woeful performance of the GSE in 2019 can be blamed on the banking crises even though inflation, interest rates, exchange rate and other indicators are seemly stable.
2nd quarter financial results released by listed companies generally portrays companies to be either stable or rising, led by the financial stocks.
The stock exchange can only rebound when the banking crises is fully resolved. When locked up funds are adequately released to beneficiaries.
Pension fund managers, high net worth individuals as well as foreign investors are the main drivers of the stock exchange. Some of these categories of investors are heavily exposed to the collapsed institutions and they will need their funds to be released to carry on with their investment activities.
Resolving the banking crises is the only catalyst to the revival of the stock exchange, so as the Receivers of the collapsed Banks have started making moves for payments, should all payments be made, and the economic indicators remain in reasonable trends, the Ghana Stock Market is certain to rebound in the election year.
