Ghana’s stock market records 17% drop from Jan. to June due to impact of COVID-19

The novel Coronavirus pandemic, which has claimed over half a million lives globally, has devastated economies and businesses, aside from revealing weaknesses in global health systems and supply chains, especially in Africa.

While its spread has benefited some businesses, it has left many others in jeopardy, hitting listed companies on the stock market in Ghana.

The pandemic has affected manufacturing, trade and investment in Ghana and around the world, leaving an impact on the prices of global commodities such as crude oil, gold, and cocoa, which Ghana depends on.

The impact on tourism, people and the fiscal economy is also visible, as government budget has been thrown out of gear due to reduced revenue generation and tax collection.

A look at the impact on stock markets around the world, where shares in companies are bought and sold, shows that big shifts were experienced as the FTSE, Dow Jones Industrial Average, the Nikkei and Ghana’s own local bourse, huge drops as the number of Covid-19 cases grow.

In Ghana, the composite index (GSE CI) which reflects the average performance of shares of listed companies witnessed a significant drop of about 17 percent from January to early June of 2020. The composite index, however witnessed a drop of about 8 percent within the same period in 2019.

The General Manager of UMB Stockbrokers, Ben Ackah, explained the dynamics of the market and the reason for the significant drop.

“The stock market index is just a measurement of the performance of the market. The composite index in Ghana here measures the index of the market as a whole, while the financial stocks index, measures that of the financial stocks on the market. Now, in general when the market or the index is going up it means that the average prices of the stocks in the market are also going up. Now, the index has gone down this year generally due to the impact of the Coronavirus pandemic on the market and the economy as a whole. Basically the market is a reflection of what’s going on all around us including the economy,” he said.

Among the many reasons why share prices are dropping, Mr. Ackah says the difficult times people are experiencing due to the Coronavirus could also be a factor.

“Let’s be clear, there are companies that are going through challenges, and some of those companies are laying off people while others are reducing salaries. People’s livelihoods are being affected in one way or the other. Some may have invested originally for long-term purposes, but have decided that they badly need the money at this time to shore up some of their expenditures. So based on that, they will be willing to offer it even if it’s a discount at the price at which they purchased it before. And based on that, that is why prices are falling. Until the Coronavirus is handled in a way, we will continue to see some dropping of prices,” he said.

It’s not all gloom and doom as the market has also witnessed some significant activity on the trading front as more than 260 million shares valued at GHC 194 million have been traded in the first six months of 2020, a performance which represents a 107.9 percent growth in volumes, and 87.7 percent growth in value traded when compared to the same period in 2019.