Despite registering strong profits across board for the first three quarters of 2020, listed banks on the Ghana Stock Exchange continue to see a drop in their valuation.
The Ghana Stock Exchange Composite Index (GSE-CI), which is primarily driven by financial and consumer stocks, has experienced losses for the past three years, with the current year to date loss for the entire index being about 18.6 percent, while the year to date loss for listed financial sector stocks is about 18.2 percent.
The trend has forced some investors to choose bonds over stocks.
According to recently released unaudited results for many banks on the local bourse covering January to September 2020, they recorded an average increase in profit for the period under review of about 13 percent.
On the Ghana Stock Exchange however, institutions like GCB Bank, CAL Bank, Ecobank Ghana, SGSSB, and Access Bank, all saw their valuation for the same period under review, drop by an average of about 17 percent.
But according to the Deputy Managing Director of the Ghana Stock Exchange, Abena Amoah, investors are starting to take note of the impressive performance of the listed companies especially the financial sector stocks, and are returning to the equities market.
“We’ve started seeing demand pressure building up, and also the share prices of many of the companies have stabilized compared to the downward trend earlier in the year when the bargain hunters set in. So for the market, we are very confident going forward that we have bottomed out on the equities side.”
“Also the companies we realized were showing much better profits than we had anticipated, were especially in the banking, insurance, and telecommunications sector. So that has made them begin to look attractive again to investors and we see investors coming back unto the equities market,” she added.
Industry watchers blame COVID-19 for continuous uncertainty
For many industry watchers however, the pricing and valuation of the listed stocks does not reflect the strong fundamentals of the companies.
A key reason for the disparity is the uncertainty generated by the COVID-19 pandemic, forcing investors to turn to the fixed income market.