Ghana Stocks May Snap Losing Run With Banks, Oil in Demand

ACCRA (Capital Markets in Africa) — Ghana’s stocks may snap three years of declines in 2021 as an improving economy and a more stable cedi attract foreign investors, according to Ecobank Development Corp., which expects local bank and oil-company shares to be in demand.

The benchmark Ghana Stock Exchange Composite Index of 31 shares is set to gain as much as 15% this year, Nene Lomo Nartey, head of trading and sales at EDC, said in a telephone interview from Accra.

“Foreign demand began returning in the last quarter and we think that will be sustained by the government’s commitment to getting Covid-19 vaccines, which raises the prospects for economic recovery,” Nartey said. The cedi’s depreciation against the dollar in 2020 was the slowest in 14 years and government and central bank efforts to extend this positive momentum are likely to continue, he said. EDC expects the economy to expand by 4.5% this year, compared with a government forecast of 5.7%.

Local lenders are in a healthy state following a sweeping cleanup of the sector that started in 2017 that saw scores of lenders and micro-credit companies shut down. Nartey expects GCB Bank Ltd., Standard Chartered Bank Ghana Plc, Ecobank Ghana Plc, and Enterprise Group Plc to post gains this year because investors are beginning to see value in these stocks.

“There’s a lot of demand for GCB, but not many sales offer because people are optimistic about the financial sector,” he said. “When you’re looking for Ecobank Ghana and Stanchart, you don’t get all the volumes you want to purchase.” EDC is the investment arm of Ecobank Transnational Inc., the parent of Ecobank Ghana.

Oil marketing companies have returned to pre-pandemic levels of operation, and Ghana Oil Co. and Total Petroleum Ghana Plc are trading at attractive entry points, he said.

Here are some of Nartey’s views on other stocks:
Fan Milk Ltd.’s results were impressive and it is trading close to a historical low
Scancom Plc, the local unit of MTN Group, Africa’s biggest wireless carrier, is a strong buy because the pandemic increased demand for its services
Unilever Ghana Plc may be among the laggards because it’s struggling to grow core revenue
Guinness Ghana Breweries Plc may underperform because of its debt profile

Ghana’s benchmark index is up 7.2% so far in 2021. “We’re getting out of the trough,” Nartey said. “Across the board with a lot of the stocks you see that demand is exceeding supply and the least that comes with that is going to be people willing to pay a little premium.”

The cedi, which declined 2.7% against the dollar last year, has appreciated 1% in 2021. It weakened 0.1% to 5.8092 per dollar as of 9:12 a.m. in Accra.